Abbott (ABT) Q2 2025 Earnings Call Transcript

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DATE

• Thursday, July 17, 2025 at 9 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Robert Ford
• Executive Vice President of Finance and Chief Financial Officer — Phil Boudreau
• Vice President of Investor Relations — Mike Comilla

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RISKS

• Diagnostics sales face a headwind of approximately $700 million for full-year 2025, driven by diminished COVID testing demand and volume-based procurement programs in China, representing a projected 750 basis point negative impact on organic segment sales growth for the year.
• Tariffs are expected to negatively impact results by just under $200 million in 2025, as disclosed by management.
• Management identified a negative year-over-year impact from FX on EPS, quantified as roughly a nickel for Q2 2025.

TAKEAWAYS

• Total Company Sales Growth (Organic, Excluding COVID Testing): 7.5% organic sales growth excluding COVID testing sales in the second quarter 8% organic sales growth excluding COVID testing sales in the first half of the year.
• Adjusted EPS: $1.26 adjusted earnings per share in Q2 2025, up 11% year over year and 16% sequentially from the first quarter, with clear reference to exceeding the consensus estimate.
• Margin Expansion: 100 basis point increase in both adjusted gross and operating margins in the second quarter compared to the prior year.
• Nutrition Segment Sales Growth: 3.5% overall organic sales growth in nutrition for Q2 2025 (non-GAAP), 6.5% growth in adult nutrition products globally in the second quarter.
• Diagnostics Segment Sales: Diagnostics sales declined 1.5% on an organic basis in Q2 2025, mainly due to lower COVID testing volumes and China volume-based procurement impacts, with Core Lab Diagnostics (excluding China) organic sales growth of 8% in Q2 2025.
• Established Pharmaceuticals (EPD) Segment Sales: Nearly 8% organic sales growth for EPD in Q2 2025, with the key 15 markets surpassing $1 billion in quarterly sales for the first time in Q2 2025.
• Medical Devices Segment Sales: 12% organic sales growth in medical devices in Q2 2025, supported by double-digit organic sales growth in diabetes care, heart failure, structural heart, electrophysiology, and cardiac rhythm management products.
• Diabetes Care (Libre CGM): $1.9 billion in sales of continuous glucose monitors in Q2 2025, up 19.5% in Q2 2025 (organic, non-GAAP); U.S. Libre segment grew nearly 26% in the second quarter, while international basal segment organic sales growth continues to be supported by expanded reimbursement.
• Heart Failure Device Sales: Grew 14% in Q2 2025, with balanced contributions across both chronic and acute portfolios and CardioMEMS device.
• Adjusted Gross Margin: Adjusted gross margin was 57% of sales in Q2 2025, representing a 100 basis point increase in the second quarter compared to the prior year.
• Adjusted R&D and SG&A: 6.3% and 27.7% of sales, respectively, in Q2 2025 (adjusted).
• Adjusted Operating Margin: Adjusted operating margin was 22.9% of sales in Q2 2025, up 100 basis points year over year (adjusted).
• FX Impact: 0.5% favorable impact on sales in Q2 2025, with an expected relatively neutral full-year impact on reported sales for 2025, but a projected 2% favorable impact on reported sales in Q3 2025.
• Q3 EPS Guidance: Adjusted EPS forecast of $1.28–$1.32 for Q3 2025, as explicitly provided in guidance.
• Biosimilars Pipeline: enabling launches to begin in emerging markets in 2026.
• Next-Generation and New Product Launches: FDA approval for Tendon mitral replacement valve received in May, with a pivotal trial for the transfemoral mitral valve product planned for next year (as stated on the Q2 2025 earnings call).
• CRM (Avera Pacemaker) Performance: Cardiac rhythm management grew 10% this quarter.
• M&A Strategy: CEO states "strong organic pipeline" is enabling greater selectivity in pursuit of strategic M&A within Diagnostics and Medical Devices.

SUMMARY

Abbott Laboratories (NYSE:ABT) presented a quarter marked by distinct segment divergence, with medical devices sustaining double-digit organic sales growth and diagnostics constrained by COVID test declines and policy headwinds in China during Q2 2025 (non-GAAP). The company delivered high single-digit organic sales growth and margin expansion (non-GAAP) in the first half of 2025. New product milestones -- including regulatory approvals and clinical trial progress in cardiovascular and biosimilars -- indicate an acceleration of the innovation pipeline, while explicit FX forecasts offer refined visibility to investors.

• Ford stated that device business organic sales growth exceeded 12% in the first half of 2025 and described a continued commitment to high single-digit total growth and double-digit EPS growth.
• Boudreau confirmed that Q2 2025 adjusted EPS growth was supported by improvements in both adjusted gross and adjusted operating margins.
• Ford said, "FX … is still a headwind versus prior year on the EPS side, but much less of a headwind than … anticipated back in January," explicitly addressing evolving risk from currency movements that may affect future earnings clarity.

INDUSTRY GLOSSARY

• Core Lab Diagnostics: Laboratory diagnostic tests and systems (usually high-throughput) for central labs, excluding rapid/point-of-care tests.
• PFA: Pulsed Field Ablation, a non-thermal technology for cardiac ablation in electrophysiology.
• CRM: Cardiac Rhythm Management, product line addressing devices and therapies to manage heart rhythm disorders.
• CardioMEMS: Implantable sensor used for continuous monitoring and early detection of heart failure.
• VBP: Volume-Based Procurement, policy in China for centralized procurement at lower unit prices.
• Basal segment (diabetes): Continuous glucose monitoring (CGM) users managed with long-acting (basal) insulin.
• CE mark: European regulatory approval required for commercialization of medical devices.

Full Conference Call Transcript

Mike Comilla: Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer, and Phil Boudreau, Executive Vice President of 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 2025. Abbott Laboratories 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 Laboratories' operations are discussed in Item 1A, Risk Factors, to our annual report on Form 10-K for the year ended December 31, 2024. Abbott Laboratories 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 Laboratories' 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 Laboratories has not provided the related GAAP financial measures on a forward-looking basis or the non-GAAP financial measures for which it is providing guidance, because the company is unable to predict with reasonable certainty and without unreasonable effort the timing and impact of certain items, which could significantly impact Abbott Laboratories' results in accordance with GAAP. 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.

Robert Ford: Thanks, Mike. Morning, everyone, and thank you for joining us. At the halfway point of the year, we are on track with our key priorities and objectives. In the first half, we delivered high single-digit sales growth, over 100 basis points of margin expansion in both gross margin and operating margin, double-digit earnings per share, and we achieved a number of important milestones related to advancing key programs in our new product pipeline. Our sales growth, excluding COVID testing sales, was 7.5% in the second quarter and 8% in the first half of the year.

Our second quarter adjusted earnings per share of $1.26 exceeded the consensus estimate and reflects 11% growth versus the prior year and 16% growth on a sequential basis compared to the first quarter. I'll now summarize our second quarter results in more detail before I turn the call over to Phil. I'll start with nutrition, where sales increased 3.5% in the quarter. Growth in the quarter was driven by 6.5% growth in adult nutrition, where Abbott Laboratories is the global market leader. We continue to see strong demand for our Ensure and Glucerna brands in markets around the world.

This growing demand is driven by consumers seeking a source of complete and balanced nutrition, especially for those focused on protein-rich diets and meeting the dietary requirements for managing diabetes. Moving to diagnostics, sales declined 1.5% in the quarter, predominantly due to the year-over-year decline in COVID testing sales and the impact of volume-based procurement programs in China. Together, these represent a projected headwind of around $700 million or 750 basis points on the full-year 2025 sales growth in diagnostics. Excluding China, Core Lab Diagnostics grew 8%, reflecting strong underlying demand in markets around the world.

Turning to EPD, our sales increased nearly 8% in the quarter, driven by strong performance in our key 15 markets, which surpassed the billion-dollar quarterly sales for the first time. Key 15 markets include India, China, and other markets across Asia, Latin America, and the Middle East. These markets represent the most attractive areas of growth for branded generic medicines. The growth in these markets is supported by favorable long-term healthcare, economic, and demographic trends, including higher birth rates, an expanding middle class, aging populations, and growing demand for access to high-quality healthcare solutions. We serve this growing demand by offering a broad portfolio of branded generic medicines tailored to local conditions with a focus on key therapeutic areas.

Additionally, we continue to make good progress toward building a best-in-class portfolio of biosimilars, having completed launches projected 10 regulatory approval submissions across a range of emerging markets to begin in 2026. I'll wrap up with medical devices, where sales grew 12%, driven by double-digit growth in diabetes care, heart failure, structural heart, electrophysiology, and cardiac rhythm management. In diabetes care, sales of continuous glucose monitors were $1.9 billion in the quarter and grew 19.5%. In April, we announced a first-of-its-kind collaboration with Epic, enabling direct integration of Libre sensor data into the leading electronic health record system.

This seamless integration allows healthcare providers to easily view their patient's glucose data before, during, and after meeting with patients, supporting our goal of simplifying care to help deliver better outcomes for both healthcare providers and patients. In electrophysiology, we had several key accomplishments in the quarter, including delivering another quarter of double-digit sales growth, initiating the launch of our new Volt PFA catheter, and completing enrollment ahead of schedule in our PACIFLEX DUO US pivotal trial.

Phil Boudreau: In structural heart, growth of 12% was led by a combination of continued share gains in TAVR, strong adoption of Tricliv, and contributions from Amulet and MitraClip. During the quarter, we achieved several important milestones that demonstrate our commitment and progress toward expanding our portfolio of solutions to treat mitral valve disease. As the market leader in mitral valve repair, we continue to invest in the success of MitraClip. In addition to currently pursuing a label expansion to increase the addressable market, we recently launched a next-generation version of MitraClip that further enhances the procedure with improved deployment and deliverability.

To accompany our leading position in mitral valve repair, we expanded our focus several years ago to include the development of mitral valve replacement technologies. In May, we announced FDA approval of our Tendon mitral replacement valve, which offers a new treatment option for those who are not candidates for open-heart surgery or mitral valve repair procedures. At the New York Valves Conference a few weeks ago, we provided an encouraging update on the development of our new transfemoral mitral valve replacement product. We acquired this innovative technology as part of our venture investments program, which led to the acquisition of Cepheid Valve Technologies in 2019.

Following that acquisition, we continued to iterate and enhance the technology, and the FDA granted breakthrough designation. We plan to start the pivotal trial next year and look forward to creating a new solution to help treat the world's most common heart valve disease, which impacts the lives of millions of people around the world. In Rhythm Management, our strong performance is a result of our strategy to build a comprehensive portfolio capable of significantly outperforming the market and our own historical growth rates.

Our growth this quarter of 10% was led by strong uptake of Avera, our innovative LEVIS pacemaker, which is driving growing adoption of leadless pacemakers in both the single and dual chamber pacing segments of the market. In April, we announced late-breaking data from the AVAIR conduction system pacing feasibility study. This was the first study to evaluate using a Leybus pacemaker to deliver conduction system pacing, which is a novel approach to pacing that closely mimics the heart's natural electrical rhythm. Following the successful outcome of this study, we are targeting to start the pivotal trial next year.

In our heart failure business, often overshadowed by other high-growth businesses in our medical device portfolio, sales grew 14% in the quarter. This was driven by balanced growth across the portfolio, which included double-digit growth in ventricular assist devices, used to treat both chronic and acute conditions, and double-digit growth in CardioMEMS, our implantable sensor for the early detection of heart failure. Vascular growth of 3.5% was led by double-digit growth in vascular imaging and vessel closure products and increasing contributions from ESPRIT, our below-the-knee resorbable stent.

Lastly, in neuromodulation, growth of 4% was led by strong performance of our Eterna rechargeable spinal cord stimulation device in international markets, reflecting both continued uptake in existing markets and launches in new markets. In summary, our diversified model continues to provide a strong foundation that is both resilient and designed to sustainably deliver top-tier results now and in the future. This is evident in our performance in the first half of the year, which, along with our outlook for the remainder of the year and the momentum heading into next year, aligns with our long-term sustainable growth objectives of delivering high single-digit growth, healthy margin expansion, and double-digit EPS growth. I'll now turn over the call to Phil.

Phil Boudreau: 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 second quarter results, sales increased 6.9% or 7.5% when excluding the COVID testing-related sales. Adjusted earnings per share of $1.26 increased 11% compared to the prior year and was above the consensus estimate. Foreign exchange had a favorable year-over-year impact of 0.5% on second-quarter sales. During the quarter, we saw the U.S. Dollar weaken, which resulted in a favorable impact on sales compared to exchange rates at the time of our earnings call in April.

Regarding other aspects of the P&L, the adjusted gross margin profile was 57% of sales, which reflects an increase of 100 basis points compared to the prior year. Adjusted R&D was 6.3% of sales, and adjusted SG&A was 27.7% of sales. Adjusted operating margin was 22.9% of sales, which also reflects an increase of 100 basis points compared to the prior year. Based on current rates, we now expect exchange to have a relatively neutral impact on our full-year reported sales, which includes an expected favorable impact of approximately 2% on our third-quarter reported sales. Lastly, for the third quarter, we forecast adjusted earnings per share to be in the range of $1.28 to $1.32.

With that, we'll now open the call for questions. Thank you.

Operator: At this time, we will conduct a question-and-answer session. To withdraw your question, please press 11 again. For optimal sound quality, we kindly ask that you please use your handset instead of your speakerphone when asking your question. And again, that's star 11 to ask a question. Our first question will come from David Roman from Goldman Sachs. Your line is open.

David Roman: Thank you, and good morning. I appreciate you taking the question here. Maybe, Robert, you could start by just putting 2025 performance into context for us. As I listened to the walk from the prior guidance to the updated guidance, I think it's pretty clear that it comes from some factors outside the U.S., in diagnostics plus COVID diagnostic headwinds. But maybe you could help us think through the headwinds you're seeing this year, the extent to which those are transient versus more permanent changes in the growth rate, and what that looks like next year.

Robert Ford: Sure, David. I'll just start off with, like, our goal is to always ensure that every one of our businesses is meeting and beating. Right? The reality is in the portfolio of Abbott Laboratories and the complexity and the broadness that we're, you know, geographically across the different types of products. You're gonna have some businesses that will fall short from time to time, and others, you know, do better. And we've seen that time and again. The goal here, David, is always to really take all of that complexity and just translate it into reliable and sustainable growth. And that's what we've been doing this year. So when you say characterize your growth this year, listen.

We've got a device business that for the first half of the year has grown over 12%, double-digit growth in a lot of our businesses. Our pharma business has done very well, 8% growth in the first half, building the biosimilar portfolio. Nutrition, first half about 5%, which is in the range that we've always expected them now that we've, you know, lacked a lot of the market share kind of recovery process here. So really the challenge that we've had is twofold here. It's really a drop-off on our COVID test sales and some challenges in the China Core Lab market together with some changes that we've seen in the U.S. foreign aid funding for HIV testing.

So you look at that and say, okay, I'm not sure these are impacts that are 100% definite in the second half of the year, but I'm not gonna sit here and try and kind of forecast what COVID testing is gonna do. We had expected to see a China recovery in volume. We knew the price impact in China Core Lab, David, and we rolled that into our guidance. We had expected a market volume recovery to start happening in quite frankly, starting in Q2. We haven't seen that, so we've moved that out and into, you know, into Q4.

But you put all that together, it's together with the U.S., with the funding for HIV testing that's over a billion dollars of, I guess, of headwind. And even with that billion dollars, we're still forecasting high single-digit growth and absorbing the impact of tariffs. We now expect to be just under $200 million of impact. FX, you know, as Phil kind of said in his comment, is still a headwind versus prior year on the EPS side, but much less of a headwind than what we had originally kind of anticipated back in January, and quite frankly, people, too. So that helps offset some of the tariff impact.

So, yeah, I put this all together, and it'll be nice, David, to see these headwinds behind us next year. And then as you look to next year, you got all this great launch activity across all the businesses, whether it's Volt in the U.S., Tactiflex Duo internationally, the dual analyte sensor, the launch of the new Alinity system, the biosimilar kind of rollout. So I look at all of that, and I say, okay. You've got this headwind that we're facing here. Still, we're committing to high single-digit growth and double-digit EPS growth. And then as you look into 2026, those headwinds aren't gonna be there.

And then you've got all this kind of great momentum, I'm sure we'll talk about in other parts of the business. So I looked at 2026. I know what the consensus is. They look very reasonable to me, in that range of high single digits, double EPS. It's in line with our historical growth. It's in line with the guidance we've given this year, and it's in line with, you know, what our long-term sustainable growth targets are. So, yeah, it'll be good to see these elements here that I've just kind of highlighted that are specific to diagnostics. And I'll just take it a step further here.

I mean, you look at our, and I mentioned this in the opening comments here. Our Core Lab business outside, and I hate doing this, but I think it gets context. If you look at the U.S., it was up 7%, 8%. The European region was up 8%. Our Latin America region was high teens. So our core lab business is doing very well. Alinity is doing very well. We just got this issue that, you know, we're gonna have to go through this year as it relates to VBP and the disruption that happened in our core lab business in China. But we're still very bullish on this segment.

We still believe it's a very important part of the healthcare system. So like I said, looking forward to these headwinds being behind us, and we're well set up for next year.

David Roman: That's very helpful. Maybe I just push a little bit harder on one point there. If I look at the guidance for this year, it's really kind of 8.5% when you take out some of those one-time headwinds. One thing you didn't mention was obviously, EP, you faced a little bit of a portfolio gap this year, and that looks to fully resolve as you head into the back half of the year and into next year.

So is there a scenario in which we could see some of these one-time headwinds reverse and see the growth rate accelerate into 2026 and correspondingly see that fall through to the bottom line, recognizing that it's early to talk about 26%, but just conceptually, some of these headwinds fading and some of those pipeline drivers starting to kick in more significantly?

Robert Ford: Listen, there's definitely a scenario where you could see that growth rate accelerate. Right? I mean, it's a little bit early to kind of put a full stop on that, but there's definitely opportunities across the portfolio which we'll talk about. Like you said, hey. You mentioned electrophysiology. I mean, that's been one part of our portfolio that has consistently, you know, kind of exceeded the expectations, both expectations quite frankly, that you guys have had and the expectations that we've had. So, yeah, I mean, there's definitely opportunity as these reverse out to see that acceleration.

Maybe a little bit early to say that, but right now, in terms of where we're sitting 26, I feel very comfortable with that.

David Roman: Excellent. Appreciate you taking the questions and bearing with me here as I have a cold today. Thank you.

Robert Ford: Yep.

Operator: Thank you. Our next question will come from Robbie Marcus from JPMorgan.

Robbie Marcus: Great. Good morning. Thanks for taking the questions. Two for me. I'll ask them both upfront, both product questions. Diabetes and EP both performed really well in the quarter. Particularly US Libre. It was good to see US double-digit EP. Maybe just walk through some of the trends you're seeing in each of those product lines. Especially in diabetes, there was a lot of buzz around ketone integration and that product coming from Abbott Laboratories. So what are you seeing in diabetes and then also EP, especially now with Volt's launching outside the U.S.? Thanks.

Robert Ford: Sure, Robbie. Yeah. Another great quarter of Libre. I think almost 26% in the U.S. An acceleration internationally also. I think all three segments we're seeing great momentum. So if you look at the intensive insulin user segment, you know, obviously, that's been a key growth driver for the market. But there's still, you know, there's still segments there that are under and we're seeing nice growth in there. And, you know, the new sensor you referenced, I think, is gonna definitely accelerate there. The basal segment's doing very well. Big growth driver for us. Still market leader here. Our view globally is we've got about a 70 share.

You know, some of the markets that have kind of reimbursing for Basal, Robbie. We're starting to see more markets go down this path and start reimbursing basal, whether it's like specific tenders and regions or different parts of healthcare systems. So that's good, and we see sustainability to that growth rate and our position in those international markets. And then, you know, the non-insulin user segment's doing very well, very nicely. I mean, I think right now, you've seen commercial coverage here in the United States. I'd say around about 30% is what we're seeing, and that's doubled over the last three years. So I think the trends are doing very nicely there.

And I could see that continuing for the foreseeable future as part of our road to $10 billion in revenue. Your question on or at least your comment on the dual analyte sensor. I think this is gonna be a real next-level kind of, I'd say, significant change in the CGM market. Specifically for the intensive users. You know, ketone monitoring helps prevent diabetic ketoacidosis. We have a legacy of being in that. You know, we were the first company to develop a blood test, a rapid blood test for that, you know, many decades ago. So we know how important it is. It could be life-threatening.

You know, the ADA conference you referenced, I thought there was some interesting clinical data that showed 30% of pediatric patients and 40% of adult participants saw, like, in this trial saw, like, increased ketone levels that put them at risk if there was an interruption in insulin delivery. So there's clearly a need for this patient segment. I think you saw that all the announcements that came out during the conference with all the pump integration. So there's clearly a need there. It's understood. And an opportunity to expand even further, we know that ketone monitoring here is going to create a path for doctors to prescribe SGLT2s for type ones.

These are great drugs that offer a lot of cardiovascular benefits, but they come with a DKA risk. So we think that's gonna have a huge opportunity too. So good trends in the existing segment right now, Robbie. And I think that our position is just gonna be strengthened even more as we bring out the innovation. So looking forward to that. I think on your question on EP, yeah, we saw a good double-digit growth in EP this quarter. Double-digit growth last quarter. Saw an acceleration in the U.S. growth rate this quarter versus last quarter, and a lot of attention now shifting towards rolling out of Volt to the international markets.

We tend to like to launch our products in a more kind of limited fashion. So when you move from clinical trials to full-out launch, we like to have this little period in between here, Robbie, where we get to just put it out in a little bit more of an environment that we can just make sure that, you know, we're clearly understanding and getting all the feedback in a more direct fashion. When you go a little bit more focused, you get a great opportunity to do that. So really focusing right now on the sites that were enrolled in our trials, and the feedback's been excellent. I think that it stacks up very well versus competitors.

I think the balloon design is perfect for PVI. I think it optimizes a lot of the process. And if you think about where the prior balloon-based systems were used in Europe, I think it fits very nicely there. But its efficacy is great. Parasitamab data is best in class. As we said during the period we were talking about the development of Volt, we believed in mapping and contact and visualization of contact, and I think that's what we're seeing for these early cases here. Just providing really real-time feedback on tissue contact. You know, that leads to fewer applications, leads to less fluoro time, leads to less muscle contraction, which I think is really important.

You think about some of the segments globally that are going to start to really advance in terms of market segments, segments that will benefit by having a procedure that could be done without general anesthesia and just with general sedation. And I think Volt fits very nicely into those segments there too. So far so good. The team's doing a great job. They've been doing a great job over the last couple of years, and I think they're excited now to transition to this phase of the strategy now, which is now that we've gained a lot of market share with mapping. And it's now to bring in the PFA catheter that we think is very competitive.

Robbie Marcus: Appreciate it. Thanks, Robert.

Robert Ford: Thank you.

Operator: Our next question will come from Larry Biegelsen from Wells Fargo. Your line is open.

Larry Biegelsen: Good morning. Thanks for taking the question. Robert, just wanted to ask one follow-up question for multipart. Follow-up question on Libre. So first, I'd like to get your reaction to the proposed competitive bidding for CGM and what that could mean for you. Second, the RFK Jr. comments on wearables. Do you think that could accelerate type two non-insulin CMS coverage? And just lastly, on the dual ketone sensor, do you think that could drive share gains for you in intensive insulin patients, where your share is lower?

Robert Ford: Thank you. Sure. So three-parter. On competitive bidding, Larry, listen, there was nothing unexpected in the CMS proposal document here. I don't think there's any major changes as it relates to CGM. If CMS chooses to go down the competitive bidding route, it's really gonna be the DMEs that are gonna be the ones doing the bidding, not the CGM manufacturers. I think this is probably gonna take a couple of years to fully implement the process. And I don't expect there to be an impact on Abbott Laboratories, but we're gonna continue to monitor.

And as I've said in other situations, one of the things that we've gotta keep on doing here is to be the leader of scale, leader of cost. And so, you know, we'll continue to monitor, and we'll be ready. Your other question was regarding the comments from the secretary of HHS regarding wearables. Listen. Wearables are powerful. We've known this since we've launched. They're very powerful behavior modification tools. And behavior modification has really proven to drive significant impact on one's health. And so I think if you can keep your glucose levels in a healthy range, it offers a lot of benefits. There's a lower risk of diabetes, heart disease. It helps with weight loss. We've seen that.

Improves productivity, etcetera. So I appreciate the secretary's efforts here to promote improving the health and wellness of all Americans. And I think that's in line with our company's mission and certainly supportive of this initiative. You know, we would hope that it would be Americans wearing CGMs that were made in the United States. We have two manufacturing sites. But, anyways, we support that initiative. And then I think your question was regarding the continuous glucose ketone sensor. Do we think that kind of accelerates our share gain? 100%. Yes.

Larry Biegelsen: Clear. Very clear. Thank you.

Operator: Our next question will come from Vijay Kumar with Evercore. Your line is open.

Vijay Kumar: I had one product-related and one P&L question. On the product side, your CRM is doing really, really well. Are there any metrics you could share on what percentage of your installed base has been updated or converted? Where are we in the conversion cycle? And is this now like a double-digit or teens for the foreseeable future? What do you think is the ultimate TAM for this kind of product?

Robert Ford: I think it's fundamentally changed the growth trajectory of our CRM business. And now you're trying to ask yourself, okay, is this a one-off thing or can we bank on this? If you look at the trajectory of our CRM business, 2023 when we launched single chamber, our growth rate was 7%. 2024, it was 7%. First half this year, it's 8%, showing 10% growth this quarter. I think that achieving this is very sustainable. You know, I've talked about what we wanted to do with Avera in the past. You've got a $4 billion global pacing market that really hasn't seen much innovation, Vijay.

And what we wanted to do was to really make sure that as we rolled this out, we weren't just looking for a kind of a niche, kind of jump in sales and then that's it. So the team has done a really good job here in terms of coordinating between marketing and clinical and sales. And I think these teams have now really gotten full, you know, are really aligned. I think they're really hitting their stride here to be able to look at expanding, not just in the U.S., but also internationally.

So I think it's the work that they're doing here to be able to get physicians trained and hospitals set up, and it's a little bit of a different implant procedure. So you do need to go through that. But we took our time to do this and do this right, and I think we're seeing the benefits here of taking that time to do it right. I think it's really driving uptake, not just in single, but without a doubt, in dual-chamber. So we're seeing an increase in the number of accounts from a year ago. We've seen an increase in the number of physicians that have been trained. That's increased by 50%.

I think it was the last time I saw it. The implants per day have doubled as a result of that. So I think it's going very well, and I think I expect to see this outer performance continue here in the next several years. One of the things that we're also doing to support that, and I said that in my prepared comments, was, you know, we gotta continue to innovate here if we want to be able to support that growth. Right? So we'll launch a next-generation Avera that's got a 25% longer battery life that's going to add another two years.

And we're developing this conduction system pacing product here, which we're targeting to start a pivotal trial in 2026. And I think given the excitement that we have with the product, I think we're gonna see good enrollment there too. So and then on top of that, we're rolling it out internationally too. Right? So right now, it's launched in 50 countries. Some of them have been launched for a year or two years. Some of them are just in the process of launching. So I think there's a lot of good momentum here with this portfolio, not just in terms of out in the market, but also in terms of R&D and clinical work.

Vijay Kumar: That's helpful. And maybe one P&L on the EPS guidance here. The top end was lowered by 5¢, and the midpoint was maintained despite, I think, operating margins tweaked down, organic coming down. What are the offsets here? You know, maybe some comments on what is underlying operational versus perhaps change in FX and tariff assumptions?

Robert Ford: I'll let Phil take that one.

Phil Boudreau: Thanks, Vijay. Very quickly here, Robert touched on some of the sales drivers and kind of derisking elements there. And we also touched on kind of the FX impact going forward at current rates at least and kind of that relationship that's not a one-for-one fall through just kind of the mechanics of how inventory moves through the system and the like. So while there's a neutral top-line impact, there's still a headwind both year over year, as Robert touched on in his opening comments, but still a headwind on the bottom line here along with kind of tariffs rolling in the second half of the year as those work their way through inventory as well.

So those are the elements of derisk and kind of normal headwinds.

Vijay Kumar: Sorry. Could you quantify what was tariff contribution versus operational FX?

Phil Boudreau: Yes. I think Robert mentioned tariffs are a little less than $200 million impact here, so down from previous estimates. And then the FX impact here I think over the last several years, if you look at it on average, we face on average about 4% EPS headwind on the bottom line. And that kind of moves as currencies will and do. Along with factors on inflation and interest rates and the like. But, you know, we're in that same realm of impact, a little less than that historical 4%, but certainly, year on year negative impact from the effects of roughly a nickel.

Vijay Kumar: Got it. Thank you.

Operator: Thank you. Our next question will come from Travis Steed from BofA Securities. Your line is open.

Travis Steed: Hey, thanks for taking the question. First question was on M&A. Just kind of curious, how you're seeing the pipeline shake up in Diagnostics and MedTech. And if we could see Abbott Laboratories do a more sizable transaction this year on the M&A side. And then it sounds like on EPS, like, you're comfortable with the Street consensus double-digit EPS growth next year. Is that assuming tariffs at the current rate? Or do you have a lot of some P&L flexibility next year as well if tariff rates move a bit from here?

Robert Ford: Sure. What was the first question again? Oh, M&A. M&A. Yeah. Yeah. It's a good environment for M&A. Good opportunities out there. Got a strong organic pipeline, so that allows us to be a lot more selective here. We're seeking opportunities that will fit us strategically and generate an attractive return. So not looking just to acquire business to make our top line larger here, you know, profitability, as I've said, the earnings, the ROIC, that all matters to us. So and then your question on EPS for next year, does that include FX? Well, listen. It includes what we know right now, Travis, and, you know, those, you know, as we're all going through, they can change.

They can kind of move around. But as I said in the call in April, you know, our goal here is not to use, you know, focus on mitigating items that would cause a year-over-year kind of impact. So, you know, we didn't go out and build a bunch of inventory, you know, over the last couple of months. You know, we did do some of that where we thought it was important to do, but, you know, using that as the way to mitigate tariffs this year is not gonna cause, I think, headwinds if you just rely exclusively on that. So as we've said, we're building, you know, we have a whole team that's been working on this.

They're, like, six different work streams that we're looking at. And, you know, we've got a very strong manufacturing network around the world, around 90 manufacturing sites. We're gonna build another cardiovascular manufacturing site here in the U.S. and begin that process also. So we're thinking about it once tariffs get set in place, they're very difficult to walk away from. So we have to think also medium-term, but also long-term.

Travis Steed: Great. Thanks a lot. Yeah.

Operator: Thank you. Our next question will come from Danielle Antalffy from UBS. Your line is open.

Danielle Antalffy: Hey, good morning, guys. Thanks so much for taking the question. Robert, I actually just have I'll keep it to one product question, and that's within MedTech, specifically Structural Heart. I mean, you guys have been launching Amulet for a while now, and we have a pretty potentially big game-changing trial readout coming for your competitor early next year, which to me feels like a rising tide lifts all boats situation potentially.

So I'm just curious, looking at the structural heart consensus estimates for next year, modeling deceleration, I mean, I just have to imagine that could actually accelerate annual growth and would just love to hear your thoughts on how you're thinking about that and the potential TAM expansion that I think would be a class effect for both devices that are on the market today and sort of how you factor that into the long-term outlook here for the structural heart business. Thanks so much.

Robert Ford: Sure. Well, I mean, I concur with all the things you've been talking about there as this is a very important kind of growth opportunity that we see also. Competitor has been investing in a trial that could potentially expand the market, so are we. So we have our own trial here. I think it's going to be important to have the data to be able to support your product. So we've made that investment. We should complete enrollment in our trial this year, and then, like I said, if these are all great trials and positive trials, I think it's going to have a big impact here in terms of our ability to expand the market.

Our job also, you know, we're not the market leader, we have things that we also have to address. So we've spent a good amount of R&D money, Danielle, to make sure that we can, you know, accelerate here our second-generation device. And, you know, we're enrolling in that pivotal trial. I'd say what we were trying to resolve there was or improve upon is we've got great, we've got a superior sealing capability, and we've got this much broader range of ability to hit a lot of different types of anatomies. But one of the feedbacks that we got is, like, can you make it easier for deployment and delivery?

So the team has done a really good job with that. The feedback that I have gotten, not only from my team but also from the physicians that are enrolling in our trial for this next-generation product has been spectacular. Very positive on those issues that we were trying to improve upon. So we think this is a very strong opportunity for us, you know, tying in with our EP and AFib procedure. We know there's a growth in concomitant procedures here too. So I think that this is an important growth driver for us. And I share your view.

And I think that our product here is very competitive, and it's gonna become very, very competitive as we launch the second generation.

Danielle Antalffy: Thanks for that.

Robert Ford: Thank you.

Operator: Our next question will come from Josh Jennings from TD Cowen. Your line is now open.

Josh Jennings: Hi, good morning. Thanks for taking the question. Wanted to just ask about your TAVR franchise. And maybe, Rob, if you could help or share your expectations for market growth here. The commercial effort for Navitor and then the addition of this pipeline bone expandable Encantor platform. I mean, how does Abbott Laboratories view the market and how do you see the franchise taking share, and what will drive that? Thanks for taking the question. Oh, and just a quick nuance. If you can talk about anything that you're seeing in Europe with the Boston exit and Navitor uptake or share gains from that competitor event, that'd be great. Thanks for taking the questions.

Robert Ford: Sure. Well, listen, we wanted to be our vision here is to be the leading structural heart company, global structural heart company. And the only way you can actually do that is to really have a full portfolio of products here. And, obviously, I've talked a little bit in my comments about Mitral. We've made the investments in the Tricuspid area and making the investments in the TAVR side too. So specifically on TAVR, Navigator continues to get a lot of positive feedback from the physicians. It's a very compelling offering. It's a valve design, easy to implant, got great clinical data. Our sales have doubled over the past two years.

The big driver of that, I would say, these past two years has been international, as really being the driving factor here of success, and I expect that to continue. There is an opportunity here to accelerate that growth internationally with a competitor market exit. I know the team's all over that. And with the upcoming CE mark that we have planned for Navitor to have low and intermediate risk label expansion, it could come at a perfect time, to be quite honest with you. So I expect that to continue and accelerate for us, Josh. And then we're building our position here in the United States.

You know, right now, we're in about 20% of the centers in the United States. And the way to expand our position here is we gotta be in more centers. And the way to do that is you need more clinical people. You need more feet on the street, and that's what we're doing. So we've actually, we will be doubling the size of our team, and I'd say putting ourselves in the realm of being more competitive in terms of access to sites by the end of this year. We'll have doubled it versus last year. And there's a normal ramp-up in terms of rep productivity that we know in this space.

So, you know, all the people that we've been adding, I expect that now start to really have a nice impact as we go into 2026. Definitely a competitive space. There's no doubt. But I think here between the commercial investments we've made in the United States, the opportunity label expansion, and just a market disruption in international markets, I think that is a tailwind for us too there. And then, you know, once you commit yourself to developing, you know, next-generation kind of balloon expandable TAVR, that also opens up a nice opportunity for us even though that'll probably be, you know, more towards the end of this decade in terms of full launch.

But it does help as you're rolling out, you know, all these strategies that I talked about. So we feel good about the TAVR team's doing a good job. I'd like them to do better, but, you know, so far so good. And there's a lot of good momentum for us on this business.

Josh Jennings: Appreciate it. Thank you.

Robert Ford: Thank you.

Operator: Our next question will come from Adam Mader from Piper Sandler. Your line is open.

Adam Mader: Hi, good morning. Thank you for taking the questions. Two quick ones for me. I'll ask them both upfront. Robert, first, was hoping for an update on incident formula litigation and the MDL process and how you think about potential pathway to resolution from here. And for the second question, wanted just to go a little bit deeper on the dual analyte sensor, you know, specifically around expected approval and launch timing. Is that first half 2026? Pricing strategy and how quickly you'll integrate with the different pumps. Thank you for taking the questions.

Robert Ford: Yeah. Sure. Listen. I'm not gonna comment specifically on any kind of upcoming case regarding the neck litigation. I'm gonna commit to what I've always said, which is, you know, this is a product that has been supported by the medical community, by the regulatory community, by the scientific community. It's been in the market for a long time. It does not represent much to our revenues. And, you know, we stand behind the product. It's safety. The regulators have stood behind it and issued statements about the product. And we're going to stand behind it.

If we need to take action on the product and, you know, like I've said in the past, it's a small part of our revenue. And if we have to take action on the availability of that product, we will. If, you know, if the science is not respected, if the regulatory process is not respected, if the medical community is not respected, then, you know, it's gonna be difficult to keep that product on the market. But, so far, I think there's been a lot of support from the physicians and from the regulators, a lot of support from a variety of different stakeholders to want to see this resolved and this product remain on the market.

And, ultimately, those making the decisions on how to feed the most vulnerable of the American citizens here should be physicians and neonatologists and not, you know, not lawyers in courtrooms. And then, well, sorry. What was your second question?

Adam Mader: Sure. The second question was just a couple follow-ups on the dual analyte sensor. Wanted to just better understand expected launch timing in the United States. If you're giving, you know, any color around pricing strategy and just how quickly you'll integrate with the different pump players? Thank you.

Robert Ford: Okay. So three questions there. On timing, I'm not gonna talk about timing of that. I'm not gonna talk about, you know, when we submitted, how we've submitted. All I'll say is that this is the first time that you'll have a sensor that will measure continuously two different analytes. So we've done a lot of clinical work, approximately five different trials to be able to support its submission. We've already completed those trials. So I'm not gonna give a timeline to when the product's out, neither am I gonna give any on pricing and how we will think about pricing.

But as it relates to integration, you know, one of the reasons we wanted to, you know, line up, you know, have the conversations with, you know, with the insulin delivery pump companies is to make sure that when we do have it approved that it will be available as quickly as possible for that population. So as you saw during the ADA, there were some announcements over there, and I think that's, you know, that's a little bit of the strategy behind that.

Adam Mader: Thank you.

Robert Ford: Thank you.

Operator: Our next question will come from Matt Miksic from Barclays. Your line is now open.

Matt Miksic: Thanks so much for taking the questions. I know we've covered a lot of the products and some of the key elements of the quarter and the guide. Maybe just a couple of quick follow-ups. One on M&A. I know you remain an important part of your strategy. Love it if you could share any color as to kind of where you see the next most likely kind of investment or where you think there are kind of gaps in the portfolio you'd like to fill, whether it's tricuspid or in diagnostics or across the board, be super helpful. Thanks.

Robert Ford: Yeah. I get that people always like to triangulate. I'm not gonna tell you. I'm not gonna telegraph where we're going, but I mean, I've been pretty clear. It's diagnostics. It is devices. Those are the areas that are of interest to us. Like I said, there's a lot of opportunity in both those areas. And we'll just continue to apply the framework that we've always applied to when we do M&A, which is a belief that can we make these assets better? Can we bring them to more people? Can we bring care to people as a result of them? So I don't think I've got more to add on that, Matt.

Like, on top of that, I said, we've got great growth rates here right now across the businesses. And so, again, that puts us in a space where we can be a little bit more selective.

Matt Miksic: Great. We'll leave it there. Thanks.

Robert Ford: Okay.

Phil Boudreau: Operator, we'll take one more question, please.

Operator: Thank you. And our last question will come from Marie Thibault from BTIG. Your line is now open.

Marie Thibault: Wanted to follow-up here. You've mentioned that we'll see biosimilars on the market soon. Wanted to get a little more detail on how to think about kind of the reach of those products, the investments needed on your maybe in SG&A and things. And you know, the size of some of those markets that you're trying to reach. Thanks for taking the questions.

Robert Ford: Sure. This is an opportunity for us to really look at how do you sustain that growth rate in this business. This is a business that has been growing, you know, between 8%, 10%. It's learned, through a very, very strong management team, how to manage through kind of FX cycles and inflation in markets. So they've been able to expand margins. So this is about how do we do this in a capital-efficient way, to bring more assets to an existing infrastructure that's pretty well set up, Marie, between the Salesforce that calls in the doctors, that calls on retail distribution, the teams that we have in place that work with government agencies and regulators.

So the infrastructure in place is there. Do I think that there will be some need to add some SG&A to be able to, you know, educate the market because this is a very underpenetrated market when it comes to biologics? So there is some SG&A involved in that, but it's not like this, you know, you're really taking advantage of the infrastructure and the scale that you have in these markets across different channels and regulators to be able to add in this. So, I think we'll leverage our existing presence in these emerging markets. We're gonna bring cutting-edge medicines into these countries that I say that historically lack the access.

The predominance of the diseases are just as large, you know, from a percent perspective than they are in the developed markets. And you know, if you look at the portfolio, it will look, you know, we've made, we've looked at where are the areas that we think will be of interest. So autoimmune disease, women's health, oncology, access to GLP-1s. So, you know, so the team has really done a good job here laying in here a real nice pipeline of products.

And, you know, as I said, we're gonna start launching, you know, in a small market this year, and then we'll start rolling them out, you know, obviously, as they become, from a regulatory perspective, available to us. We'll be rolling them out next year. I think this can be a nice contributor here to our growth in this business in the next few years.

Marie Thibault: Okay.

Robert Ford: Well, listen. I'll just a few comments here to close. I'm pleased with what we've accomplished in the first half. We've delivered high single-digit sales growth and double-digit EPS. We've expanded our gross margin and operating margin to something that, you know, we've committed to and we've talked about, and we've done it by about 100 basis points. You know, the second half, sales growth guidance is derisked to account for some of these items here that I consider to be a little bit more transitory that are specific in the diagnostic space, and we're gonna be lapping these next year.

That still leaves, you know, $11 plus billion quarterly revenue growing high single digits throughout the rest of the year. And on top of that, we've reaffirmed our guidance despite some of these headwinds and the impact of tariffs. So I think this is another great example of how our diversified model continues to provide that strong foundation, it's resilient, and it's well-positioned to deliver, you know, top-tier results. So we've got good underlying momentum here that I'm very confident we'll carry into next year. So with that, I'm gonna wrap up, and thank you for joining us.

Operator: Thank you, operator. Thank you all for your questions. This now concludes Abbott Laboratories' conference call. A webcast replay of this call will be available after 11 a.m. Central Time today on Abbott Laboratories' Investor Relations website at abbottinvestor.com. Thank you all for joining us today.

Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a wonderful day.

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