Abbott Laboratories (ABT) — Q1 2024 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, Senior Vice President, Finance and 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 2024. 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, of our annual report on Form 10-K for the year ended December 31, 2023. 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 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 first-quarter adjusted earnings per share of $0.98, which was above analyst consensus estimates. We also raised the midpoint of our guidance ranges for both earnings per share and sales growth. We now forecast full-year adjusted earnings per share of $4.55 to $4.70 and organic sales growth, excluding COVID testing-related sales of 8.5% to 10%. Organic sales growth, excluding COVID testing-related sales was 10.8% in the quarter, which represents the fifth consecutive quarter of double-digit growth. The strong start to the year was driven by broad-based growth across a portfolio, including growth of 14% in medical devices and established pharmaceuticals. In addition to exceeding expectations on both top and bottom lines this quarter, we accomplished a number of objectives across the pipeline, including obtaining several new product approvals and achieving important clinical trial-related milestones. I'll now summarize our first-quarter results in more detail before turning the call over to Phil. I'll start with nutrition, where sales increased 8% in the quarter. Strong growth in the quarter was led by double-digit growth in pediatric nutrition, driven by continued market share gains in the U.S. infant formula business and growth across our international portfolio of infant formula, toddler, and adult nutrition brands. In January, we launched a new nutrition shake called PROTALITY, which provides nutritional support for adults pursuing weight loss. As people eat less and lose weight from taking GLP-1 medications, undergoing weight loss surgery, or following a calorie-restricted diet. A portion of what is lost is lean muscle mass, which plays an important role in overall health. The combination of high protein and essential vitamins and minerals that PROTALITY offers can help people preserve muscle while pursuing their personal weight loss goals. Turning to EPD, sales increased 14% in the quarter. This quarter was a continuation of EPD's impressive trend of strong performance, including double-digit growth in four of the last five quarters. In addition to a strong track record of top-line growth, this business has delivered equally impressive gains on the bottom line with an operating margin profile last year that reflected more than 350 basis points of improvement compared to 2019. Moving to diagnostics, where sales increased more than 5%, excluding COVID testing sales. Growth in diagnostics continues to be led by the adoption of our market-leading systems and demand for testing that takes place in a variety of settings, including hospitals, laboratories, urgent care centers, physician offices, retail pharmacies, and blood screening facilities. Our development efforts in diagnostics focus on developing new systems and creating new tests that play an important role in making healthcare decisions, expanding the accessibility of testing, and delivering results as fast as possible. In April, we received FDA approval for a point-of-care diagnostic test that could help determine if someone suffered a mild traumatic brain injury or concussion in just 15 minutes. The test is run on our portable i-STAT Alinity instrument, which allows concussion testing to move beyond the traditional hospital setting and into urgent care centers, physician offices, and other locations that are closer to the patient, with nearly 5 million people in the U.S. going to the emergency room to be checked for suspected concussion each year. We believe this test has the potential to transform the standard of care for concussion testing. I'll wrap up with medical devices, where sales grew 14% in diabetes care. FreeStyle Libre sales were $1.5 billion in the quarter and grew 23%. As I previously mentioned, Libre has several new growth opportunities that will help continue to fuel the strong sales trajectory we have forecasted. One of those growth opportunities relates to the continued expansion of reimbursement coverage for Libre for individuals who use basal insulin therapy to manage their diabetes. Last year, we announced that Libre became the first and only continuous glucose monitoring system to be nationally reimbursed in France for all people who use basal insulin as part of their diabetes management. During this first quarter, Libre obtained reimbursement from a select number of institutional payers in Germany for basal insulin users who also use oral diabetes medication to manage their condition. These select public and private payers cover a limited number of the approximately 1 million basal insulin users in Germany, but this is an encouraging sign of the potential for further coverage expansion not only in Germany but across other European markets. In cardiovascular devices, sales grew 10.5% overall in the quarter, led by double-digit growth in electrophysiology, structural heart, and continued acceleration in our cardiac rhythm management and vascular portfolios. In electrophysiology, sales grew 18%, driven by double-digit growth in all major geographic regions and across all major product categories, including double-digit growth in ablation catheters and cardiac mapping related products. We continue to make great progress toward bringing our innovative PFA catheter, Volt, to market. In March, we completed enrollment in our CE Mark clinical study, putting us on track to file for international approval before the end of the year. We also recently began enrolling patients in our U.S. clinical trial called VOLT-AF, which will generate the data needed to support an FDA approval filing. In structural heart, growth of 13% was led by strong performance in several high-growth areas, including TAVR, LAA, mitral, and tricuspid repair. Structural heart is an area that we have invested in over the past years to create a diversified portfolio that can sustainably deliver double-digit growth. In the past, we relied almost exclusively on MitraClip to drive growth, but today the portfolio and growth are more balanced and reflect increasing contributions from newer products like Navitor, Amulet, and TriClip. In April, we received FDA approval for TriClip, a first-of-its-kind heart valve repair device designed for the treatment of tricuspid regurgitation or a leaky tricuspid valve. Data from the clinical trial supporting this approval demonstrated that patients who receive TriClip experienced a significant improvement in the severity of their symptoms and quality of life. We are excited to now offer this life-changing treatment option to people in the United States who suffer from this condition. In rhythm management, growth of 7.5% was led by AVEIR, our recently launched leadless pacemaker. AVEIR has rapidly captured market share in the single-chamber pacing segment of the market and is now being used for dual-chamber pacing, which is the largest segment of the pacing market. This revolutionary technology is helping to deliver growth rates in our rhythm management business that significantly exceed the overall growth in this market. And lastly, in neuromodulation, sales grew 17%, driven by Eterna, a rechargeable neurostimulation device for pain management. In January, we announced the launch of Liberta, the world's smallest rechargeable deep brain stimulation device, which is used to treat movement disorders such as Parkinson's disease. In summary, we're off to a very good start to the year, exceeding expectations on both top and bottom lines. As a result, we have raised the midpoint of our sales and EPS guidance ranges. We continue to make good progress on our gross margin expansion initiatives, and we're seeing strong returns from the investments we are making across our growth platforms. Our pipeline has continued to be highly productive, delivering several recently new product approvals, and we're very well positioned to continue to deliver strong results for the remainder of the year. I will 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 first-quarter results, sales increased 4.7% on an organic basis, which as expected includes the impact of year-over-year decline in COVID testing-related sales. Excluding COVID testing sales, the underlying base business organic sales growth was 10.8% in the quarter. Foreign exchange had an unfavorable year-over-year impact of 2.9% on first-quarter sales. During the quarter, we saw the U.S. dollar strengthen versus several currencies, which resulted in exchange having 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 55.7% of sales, adjusted R&D was 6.7% of sales, and adjusted SG&A was 29.4% of sales in the first quarter. Lastly, our first quarter adjusted tax rate was 15%. Turning to our outlook for the full year, we now forecast full-year adjusted earnings per share of $4.55 to $4.70, which represents an increase at the midpoint of the range compared to the guidance range we provided in January. We also raised the midpoint of our guidance for organic sales growth. We now forecast organic sales growth, excluding COVID testing to be in the range of 8.5% to 10%. Based on current rates, we expect exchange to have an unfavorable impact of approximately 2.5% on full-year reported sales, which includes an expected unfavorable impact of approximately 3% on second-quarter reported sales. Lastly, for the second quarter, we forecast adjusted earnings per share of $1.08 to $1.12. With that, we'll now open the call for questions.

Two for me. I'll just ask them both up front. First, Robert, we almost never see Abbott raise guidance particularly on the top line in the first quarter. Looking back over the past, I don't know, 5, 10 years, it's very rare. First part is what gave you the confidence to raise the midpoint of the guidance this early on in the year? And then second, obviously, there's been a lot of concern during the quarter with competitors' loss in a case for NEC as it relates to infant nutrition. I was hoping you could address that; what's your stance on the ongoing litigation? I think there's about a thousand cases that have been filed, and any upcoming data points or timelines we should be looking for.

Let's go first to your question on the guidance. Yeah, you're right. I guess I had to go back and take a look at that. I think the last time we did raise in Q1 was in 2016. I would say the framework here, Rob, is we've always done is, we set a guidance at the beginning of the year, which we believe is top tier, and then throughout the year, we want to beat that guidance, and we consider top tier to be high single-digit to double-digit EPS growth. And that's obviously excluding the COVID testing portion, which is what investors are really more focused on. So that was the guidance that we set a couple of months ago, back in January. We will target always to have that top-tier guidance and find the appropriate balance between the opportunities and, obviously, the challenges that bracket that range. If you remember in January, I said I thought that there were more opportunities than risks. I think that some of the risks that we saw in January, I still think they haven't gone away. They are still there, whether it's geopolitics or whether it's FX; those are still there. But clearly, the performance of the business continues to be very, very strong. A lot of our businesses are actually accelerating in performance. As I said in my comments, five consecutive quarters of double-digit growth here. You look at each of the businesses, EPD consecutive, three consecutive quarters of double-digit growth, great margin expansion, and the teams are now working to be able to introduce biosimilars in all the markets that we are participating in. Nutrition has done an incredible job at recovering share and growing our adult business. We have grown adult over $1 billion versus 2019. Diagnostics continues to have a great track record here, outperforming the market. We have got some great large account wins both in the U.S. and internationally that we're rolling out this year. And medical devices, I mean, what can I tell you? It's just been a real strong performer. The team has done an incredible job there. Last year, we were the fastest-growing MedTech company, at least from what I have seen from our guidance and from the other guidance’s in the market. That seems to be the case again this year. So you put all that together, plus the pipeline that's been contributing to an accelerated level, great new product approvals. I put all that together and I just feel that this type of performance that we deliver just gives us the confidence for the remainder of the outlook of the year. We felt comfortable raising the guidance again in the first quarter, which is, as you pointed out, something that we don't usually do. I continue to believe going into the second quarter as we move through that there are probably more opportunities than risks here as we move forward. I guess that's the framework of raising our guidance in the first quarter, which is something that we usually don't do. Just great performance and great momentum. And then your other question was regarding the net cases. I would say from a date, we have some court cases that will happen in July. So that's maybe a milestone that we want to look at. But if you are asking me about kind of our framework of how we look at this, I'd say for decades, we've provided specialized nutrition products that help doctors. And I think that's a key thing here. It helps doctors to provide lifesaving nutrition to premature infants. How you feed a premature infant, it's a medical decision, Robbie. Healthcare providers, they're going to use a range of options to meet the unique needs of each baby. That includes mother's milk, that includes pasteurized donor's milk, but that also includes preterm infant formula because where mother's milk is not available, there is not a sufficient supply of donor milk to satisfy the nutritional needs of all of these premature infants that are born in the U.S. And quite frankly, even when they're available for some premature infants, human milk may lack some of the calories, the proteins, the vitamins, etc., that are necessary to support the nutritional needs of the premature infants. That mother's milk needs to be fortified in order to boost the nutritional output. The medical community, they consider these products to be a critical part of the standard of care for feeding premature infants. Most of the societies when you read their positions, it is a standard of care to use these products. The doctors who work in the NICUs, they've used our products for decades, and they continue to do so today. Countless babies, Robbie, have benefited from these products, lifesaving experiences over many, many years, and there are clinical studies that have repeatedly established that these products are safe. These litigation cases, they're really seeking to advance a theory promoted by plenty of lawyers that distorts the science and it distorts everything that we know, and it's not supported by the medical community. We are preparing for our cases to be able to kind of lay out the facts, the science, and the data, and we stand behind our products.

Appreciate it, Robert. Thanks a lot.

Good morning. I'll echo Robbie's congratulations on the strong start to the year here. Robert, I just wanted to focus on EP. A multi-part question here, but just one. The EP business grew nicely in the first quarter in the U.S. and outside the U.S. Can you talk about what drove that? What you're seeing with PFA in the different geographies? Your expectations for your EP business going forward before the Volt launch? Just lastly, it sounds like we should expect the Volt approval in Europe sometime next year based on the filing date. Just want to confirm that.

Sure. Like I said in my opening comments, we completed the trial. There's a six-month follow-up, Larry. That means that we will be on target here to file for CE mark by the end of this year. Yes, I mean, I'm not surprised by our EP growth. I know many on the call might be, but I'm not surprised. First of all, it's an important therapy. It's an under-penetrated disease. We know there's plenty of growth in this segment, and as a result of that, it's highly competitive. But we haven't been surprised by the growth. If you look at PFA, it's been in Europe for three years. If you average our growth rate over those last three years in Europe, we've been growing mid-teens, and the growth remains broad-based. It was broad-based in Europe again this quarter, where we saw double-digit growth in ablation catheters. Not just on the mapping side, but also great growth on the mapping side, and this technology has now come to the U.S. I think we probably had maybe two months of seeing the technology be rolled out here in the U.S. I think the competitors have been very aggressive here in terms of bringing the technology to the accounts in the U.S., and I can say we've mapped a lot of those cases, Larry. I'm not going to say we've been in every single case, but I'd say a vast majority of the cases we've been in there. There are some similarities to Europe, but there are some differences. I think one of the things that we saw in Europe was that there was this inclination to use the technology starting off as kind of a one-shot. That had an impact more on the CRYO business than I would say on the RF side. And that's what we saw in our mapping cases. We saw here, at least in the first couple of months, that's where a large portion of those cases occurred, at least the ones that we mapped, were in places where they were traditionally used in CRYO. I think the difference we saw a little bit in Europe is that at least 90% of the cases that we were part of, direct or indirectly, were using mapping and that number was lower in Europe. So that's probably a little bit of the difference I saw here in the U.S., and that bodes well for us. Our EnSite system, our mapping system, our mapping catheters are widely viewed as an excellent option here for mapping these PFA cases. We have a large install base. Customers are familiar with it. They don't need to make room; they don’t need to fight for capital. We've got best-in-class clinical support. The architecture here is open, as I've said in previous calls. So it integrates well with these PFA catheters. We actually recently released a software upgrade last month that provides even better visualization to these catheters and potential for faster procedures and less floor time. I think this is a perfect combination, quite frankly, in a time where there's going to be a market transition. There's a lot of new products; there's a lot of choices. And when you have a situation like that, I think flexibility is key, and that's what we heard from our customers. One data point that I thought was also interesting to your question of what helped drive that in the cases that we were part of, and we saw, we also observed that an RF catheter was pulled in about a quarter of the cases that we saw. So on top of the PFA catheter, an RF catheter was pulled to do touch-ups, etc. I'd say right now, everything that we've seen in Europe on the positive side is happening. I think there are some interesting dynamics here in the U.S. that could be favorable for us also, but it's still very early. If I look at March, we had probably one of our most, if we look at cases per day, that was probably one of our highest months. So far, so good. We're excited about the technology, we're excited about our program. We released data on our program at some recent medical meetings that occurred; the feedback from those that have used our product is very positive. The integration with EnSite, including the tissue contact force algorithm and the visualization, all of that is seen as a real promise and a differentiator versus what's being used today.

Great to see the strong start here, the Q1 results. Robert, I was hoping to just ask first on Libre and just internationally, any other payment or coverage decisions that we should have on our radar in various countries. Sounds like you have made some nice progress already in Germany, and then in the U.S. I was hoping you could just help or share your thoughts on the share gain opportunity in the integrated pump segment of the CGM market versus the share loss risk in the Type 2 non-insulin cash pace segment with a competitive launch share early in 2024. I just have one follow up.

On your international question, I mean, it's always difficult to forecast exactly by month or quarter coverage kind of payment decisions. I can tell you, though, that the team has a full global map of all the work that's being done regarding clinical information and negotiations, etc. It's difficult to kind of forecast it, but what I have said on previous calls and on some of my prepared remarks is that I think you're going to see just this build occurring globally in the market as the data proves and shows the clinical medical and health economic benefit by reimbursing for this patient population. I think we're well-positioned there. Internationally, I think we got some pretty large markets already: Canada, Japan, France, Italy, Germany. Those are markets that are either fully reimbursed or starting their process. And like I said, I think you will see as the year progresses, whether it's in medical events or just as the year progresses, I think you'll see more coverage decisions. Maybe they don't get splashy, big PR news, but we are seeing continuous increases there on that. On the U.S. side, I guess I disagree with your premise that I'm going to be trading share gains on the pump side for share losses on the non-insulin side. I mean, I'm just, right now I'm looking at the data, third-party audited data, seven out of every ten new prescriptions for this basal population, which is primarily served by the primary care channel, seven out of ten are going to Libre. I think our product is going to get even more competitive and compelling; I think this is a great opportunity, and our objective here is to maintain our shared dominance and leadership as it relates to this patient segment. But we do have an opportunity here to participate a little bit more actively in what is a little bit more of a smaller segment of the population, but nonetheless a very important one, which is the AID and the market system. There are 150,000 to 200,000 new starts a year. There's an opportunity for share gain also of existing users. I think that the opportunity to bring a dual analyte sensor with ketones; we showed some data at ATTD this year that illustrated the safety benefit or the value proposition of a dual analyte sensor for AID systems. I think that's going to be a compelling value proposition. We are working with all the pump companies here, and I think as the year progresses, we'll see connectivity occur whether it's with Libre 2 Plus, our streaming product, or whether it's with Libre 3. This is an area that we are focusing on, and it's a new segment for us to compete in. But I don't think that we are going to be taking our eye off the ball as it relates to the basal opportunity that exists.

Understood. Thanks. And then just wanted to ask on the transcatheter tricuspid market. Congratulations on the TriClip approval, but there's been some questions around the patient opportunity breakdown between TIER, TriClip, and replacement with EVOQUE. Maybe just any internal team thoughts on that patient opportunity breakdown and then maybe you could share on the pricing strategy for TriClip in the setting of competitor pricing its replacement device at a significant premium? Thanks for taking the questions.

I'm not going to comment on our pricing strategy for competitive reasons. It is a differentiated and novel technology. There is an opportunity, but we'll have to see how this all plays out. You've got NTAP submissions and all this stuff going on right now. What we are focused on here is launching the product and getting cases ramped up, and that's what's happening. I got some feedback yesterday from the team after a couple of weeks, real nice cadence of growth. We are obviously focusing on our initial cases at most of the accounts that were part of our pivotal trial, but just really nice cadence of growth there and great feedback from physicians and patients post-surgery. I mean, if you're trying to poke at what's the breakdown going to be about replace and repair, listen, I think it's good to have options. I guess my view here is that I believe that probably safety is a key driver here, just to start off with. I think TriClip has shown a very strong excellent safety record, both in clinical trials and real-world use. I think that's going to play a key role here in determining repair versus replace. I expect repair or TriClip at least to be the preferred option unless the valves are too damaged, and then obviously replacement is the only option. But there is a large pool of patients here. You've got 5 million people globally, 2 million people here in the U.S., and it's going to be an opportunity here that we will be generating more data, expanding the indication of the product. I think this is easily a $1 billion opportunity for us here as we build the capabilities and as we build more clinical data.

Maybe just while we're on the pipeline, talk a little bit about AVEIR; it sounds like that product's going really well. And then I had a question on gross margins as well. Trying to think about is this the right pace to kind of get back to pre-COVID levels and still the opportunity for longer-term gross margins?

I think AVEIR has performed exceptionally well. We are all aware of the advantages it has over competing systems, including its single and dual chamber options, a longer-lasting battery, and features like replacement, retrievability, and upgradeability. In terms of market share, we are now at about 50% of the U.S. market for single chambers, which is promising. We began our dual-chamber procedures towards the end of last year and have seen a good ramp-up in this first quarter. This is a completely different procedure, marking a significant change in how these devices are implanted for the first time in 30 years. Our primary focus is on achieving excellent clinical results, being deliberate with the introduction of new sensors, and providing thorough training, all of which has been effective. The growth rate reflects this impact. Traditionally, our CRM business has been fairly stable, with some platforms increasing while others decrease. Our objective with this program was to ensure our CRM portfolio contributes to growth at mid-single digits, 6%-7%. Over the last couple of quarters, we've achieved around seven and a half percent growth. AVEIR continues to perform well, and it will improve further as more physicians are trained and we expand our accounts. I appreciate the trajectory of how we are forecasting this business and the influence it will have on our CRM portfolio. What was your other question?

Just on gross margins, kind of thinking about the path back to pre-COVID levels over the long term and is this year's cadence the right way to think about that?

I think that's a good cadence. I think we're forecasting here about 70 basis points of improvement this year. I feel good about that. I've talked about this not being a question of if, just a question of when, so I think that's not a bad cadence. We're going to focus on the things that we can control, and the things that we can control are obviously our cost and our cost teams and the teams that are working on improving gross margin; they're delivering great results here while maintaining high service levels, not running into backorders, etc. But probably the biggest opportunity we have here, Travis, is just to expand the gross margin through portfolio mix. When you have our medical device businesses growing at mid-teens consistently over the last four to five quarters, that has a strong impact on our gross margin. So a lot of focus on what we control, our gross margin, the cadence. That's what we are targeting. It's not really a question of if, it's just a question of when.

Robert, I had a two-part question. A lot of questions on pipeline, but I'm curious when people ask us on sustainability of growth, if you could elaborate on pipeline, what else is there? When you look at the future, that gives us the confidence of sustaining its premium growth within the med-tech industry? My second part was on the financial modeling side, looks like FX headwinds came in a little bit higher. Prior guidance that is $0.20 headwind to EPS from FX. Did that increase? I'm just curious on some questions on why the high end of the guidance was not raised. I suspect the FX headwind increased.

As I said, there are certain challenges that still remain with us from January, and FX is one of them. I'll let Phil answer that one. On your question on pipeline, listen, I could spend a whole hour on this just going through the pipeline, but I guess I would bucket them into three categories, Vijay. I would say you got your current contributors: Libre and Alinity. They still operate like pipeline products. We still got multiple innovations going through them. MitraClip, great familiarity, AVEIR, Navitor, TriClip, Amulet, PROTALITY, or our concussion tests, I think got great opportunity and CardioMEMS. I mean, these are all products that I would still characterize them as early innings. Yes, they're established, but they're still early innings, and they got a lot of growth rate there. The second group of products I would call probably near-term future contributors, so think about it in the next 12 to 18 months, these products coming to market and starting to generate revenue there. Our lingo product, I'm very excited about that and bringing that to the U.S. and expanding that globally. Our dual analyte sensor, our Volt system, Esprit, which is our drug-eluting bioabsorbable stent for below the knee, it will be the first of its kind. We are developing a whole new Alinity system that will target a segment of the market that we currently don't participate in, and there will be more to come on that. And then just the great opportunity we have with biosimilars into the emerging markets and doing it in a very capital-efficient way. That’s our next 12 to 18-month catalyst. Then thinking about beyond 2026, I mean, we are working on a PFA, RF catheter. You've got leadless, another kind of leadless pacing system that would be launching. We have a second-generation Amulet; excited about entry into the IVL market sometime in 2027, coronary DCB, we're working on kind of new TAVR systems that allow us to branch out into other segments. We've got a whole plethora of new analytes in our bio-wearables market that will start to come out and have different applications in 2026. And then on top of that, all the clinical work that we're doing to expand indications, expand market, whether it's in TAVR, whether it's in LAA, whether it's in mitral. So we've got, I'd say, a real nice cadence here of products and pipeline beyond, I'd say, the next 12, 18 months. We're looking at this '26, '27, '28, and I feel really excited about that. There's obviously more that we need to do and add, but I think the base here looks really good in terms of the pipeline. And then I think your question on FX, Phil, you want to take that?

Yes. I mentioned at the onset here, Vijay, in Q1, we saw about a 2.9% headwind on sales growth, and we kind of the current rates anticipate something similar here in Q2. From a full-year perspective at the current rates, it's about a 2.5% headwind on the top line. That said, the earnings guidance that we have here is in line with the organic sales performance and drop-through to earnings on the increased midpoint on EPS guidance.

Good morning. May I add my compliments and congratulations to the quarter? I have two questions, put them right up front. The first one is on concussion testing. I'd love to understand the go-to-market strategy for that, how you think about the financial benefit impact and all that kind of good stuff? But I think my second question is a little bit more big picture. As you step back in a post-pandemic environment, a couple of years into the CEO seat, how do you think about taking Abbott sort of to the next level? I mean, we all sit here and take a look at an incredibly strong balance sheet. How do you put that cash to work? Are these segments, divisions, ones you want to keep? Or how do you think about adding to it?

Sure. On the point-of-care concussion test, I guess I'd summarize the opportunity here in twofold. I think there's a market conversion component to this, Joanne. I mentioned there are 5 million ER visits to diagnose a concussion. The number one method there to use that is on a CT scan. I think there's an opportunity here to transform that and allow one to get a faster response in that emergency kind of room visit, which is where the point-of-care team already has a good position with some of our other blood gas and other assays that we provide to that segment. I think this will slide right into that team. The value proposition here is going to be, okay, what's the cost of the system, and can we bend that cost curve? I think we've shown a little bit how we think about things, Joanne, if you look at Libre, if you look at Binax, if you look at how we think about pricing our products, when it comes to market conversion and the opportunities that we have there? We'll be able to do it at a nice return for our shareholders. I think that's an important part. The market expansion opportunity that we have, I think is going to still require some work on the product. Right now the product is approved whole blood, but it's a venous draw. We're going to be working on a capillary draw, and if you can then run this assay, taking a sample from a finger prick, you can look at bringing that technology even closer to where the need for a rapid concussion test would be. You could just look at how many universities exist in this country, how many high schools exist in this country. You can do some multiplications there and say, this is a great market creation, market expansion opportunity. I think that that's how we're thinking about it commercially, conversion and creation/expansion. There’s some more work to be done in terms of the product and the claims and the trials there. This will be a multi-year kind of program where we'll start to see nice growth in that segment. And then your other question was about the portfolio and balance sheet. And do we like the four segments? The answer to that is yes, we like all four segments. We feel that it gives us a real unique view into the healthcare system as a whole starting with nutrition, that's obviously the bedrock of good health. But then things happen and you need to get a diagnosis. And we've got a great diagnostic portfolio that we've been expanding on and building to make sure that we can capitalize on all the different types of modalities and locations where people can get tested. And then once a physician knows what the problem is, then they got to run through treatment, right? And we do that either through a medicines business or through a medical device business. I think all four segments are super well aligned to the global demographics and trends in healthcare. And so we like that there's always opportunities to add, and we've shown that if there are areas that we feel that we can bring value in a combination then as you mentioned, we've got a strong balance sheet and strategic flexibility to do that. As long as we feel that we can add value to that asset. We felt like that about CSI, we felt like that about St. Jude. We felt like that about Alere. Those deals, they obviously help reshape the company and accelerate our growth rates. But I think that's predicated on us really believing that we can bring value and we're not trying to fill some top line gap or some issues. ROIC for us matters; profitability matters. We've got opportunities and we could be a little bit more selective to be able to add, but I like the four segments that we're in. They've been well to shareholders, especially the long-term shareholders.

Congratulations on a great quarter, especially in the medical devices sector. I have a follow-up question regarding the structural heart area. Robert, you mentioned the portfolio and how the leading peer device and MitraClip are becoming more established in the structural heart category, complemented by new products like TriClip. Could you discuss the momentum within the portfolio and how much of its growth is expected to come organically versus through strategic reviews? I appreciate it.

Sure. I mean, I didn't want my comments on mitral to be construed as there is slowing down, and we're relying on others to drive the growth. That wasn't the intent. If you look at MitraClip this quarter, it's high single digits. If you look at the last five quarters, that's what it's been doing between high single digits and low double digits. And that's good. But we always had a view here that this is an attractive area of growth, an attractive area of medical need. We wanted to be a leader here. So yes, we can call MitraClip the founding father of our structural heart portfolio. I think the team has done an incredible job at bringing organic innovation into the portfolio. So if you look at our structural heart, I mean, we grew 13% today. MitraClip grew high single digits, but it accounted for 3% of that growth. The rest—the other 10% came from all the rest of the portfolio that's being built. So I think that you'll continue to see that. We'll continue to make investments in this business, continue to make investments in the pipeline. I'd say right now, most of it is organic, whether it's innovating on LAA, innovating on our TAVR side and all the clinical trial that we're doing there. If there's an opportunity inorganically, I just put that in the same bucket that I think I answered Joanne's question here if it makes sense. We can add it. We've got the flexibility to do it. But the whole strategy here was to say, listen, we're going to build a multibillion-dollar structural heart business that can sustainably grow double digits. The way to do that is you can't have a division of only one product. I think the teams over the last four to five years have done a really good job at building that, and there's more opportunity. I'd say probably the one that we're looking at and is very exciting for us, is mitral replacement. We've launched our Pendine product, which was more of a transapical system. Our Cephea system is the transfemoral transseptal, and the feedback that we've seen from early implanters, early first in man, is that this is a great, great valve. There’s an opportunity there also. So I'd say most organic, but we've got the capacity for inorganic if it makes sense.

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

And yes, congrats on a strong start to the year. Robert, we spent a lot of time talking about the durability of growth in the med tech business. So I don't want to get too greedy, but just following up on Joanne's question regarding you guys do have a strong balance sheet. Are there any areas— I guess sort of how do you feel about the state of the med tech business today? Do you feel there are growth areas within med tech that maybe Abbott isn't participating in today that Abbott could or should participate in? Where are you looking beyond your current markets, if at all? I'll just leave it to one.

Sure. I get the attempt for triangulation here in the multiple different ways, and I guess I'll sign a little bit boring here in terms of how I talk about this. I've been public that, yes, we are interested. We look at areas that we can add value to. I'd say probably the ones that have jumped out more at us in terms of a study and looking at are probably more on the medical device side and the diagnostic side. We did look at a strategy for biosimilars for our medicines business, and that was a pretty capital-efficient way to do it. Yes, we're looking. We continue to study, but I'm not going to sit here and telegraph exactly it's this, it's that. I think the key thing here is just, I mean, look at our medtech business did this quarter, and look what it did the previous four quarters, and that allows me to be a little bit more selective. Over the last couple of months, we’ve seen some fairly large transactions in the medtech space. Those seem to be attractive growth areas. I talked about us getting access to some early IVL technology with the CSI acquisition. That's an important area for us to focus on. But I don't feel that with our strong organic growth that we need to go out and not pay attention to other key financial metrics that for us are important in terms of ROICs and those, because we've got that strong growth rate in medtech. You won't get me telegraphing here exactly, Danielle, what specific segments we are looking at. What I can tell you is we have an active team. They study a lot. We look a lot. We follow a lot. If there's a moment that makes sense for us, and those segments continue to be interesting, we've got the balance sheet and the track record to show that we can drive value out of these acquisitions. I'll just leave it like that. Yes, we've got flexibility; that doesn't mean that we don't pay attention to other key financial returns as we're looking at it. I feel that I can do that because we've got such a strong top-line growth and great pipeline and prospects. With that, I'll leave it like that. I'll just close by saying that we're very pleased with a very strong start to the year. We delivered another quarter of double-digits organic sales growth on the base business. The investments that we've made during all those years of COVID are generating real strong returns. The pipeline continues to be highly productive, as I've outlined. We've got clear visibility to a pipeline all the way out to '27, '28. Obtained several new product approvals that are going to help us accelerate our growth in certain areas. Typically, we don't raise guidance in the first quarter, but given the strong performance and the outlook and the remainder of the year, we felt comfortable doing that, and we're very well-positioned to continue to sustainably deliver top-tier results. With that, I'll wrap up and thank all of you for joining us today.

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 am Central Time today on Abbott's Investor Relations website at abbotinvestor.com. Thank you for joining us today.