Abbott Laboratories Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Organic sales growth was 7.5% excluding COVID test sales, with double-digit growth in medical devices and high single-digit growth in established pharmaceuticals.
• Earnings per share rose to $1.30, up high single digits compared to last year. Recently launched new products generated nearly $5 billion in sales and added over 100 basis points to organic sales growth.
• Nutrition: Adult nutrition grew 4%, driven by international markets and new product launches. Diagnostics: Modest growth with challenges in China but acceleration outside. EPD: 7% sales growth with progress in biosimilar strategy. Medical Devices: 12.5% growth across various segments, with new products and regulatory approvals driving growth.

Segment Performance

• Nutrition: Sales increased 4% in the quarter, led by the adult nutrition business. Ensure remains the cornerstone, with 10% growth in international markets. Recently launched new versions of Glucerna and Ensure.
• Diagnostics: Modest sales growth excluding COVID testing. Challenging market conditions in China impact core lab diagnostics, but excluding China, Core Lab Diagnostics grew 7%, and point of care diagnostics grew 8%.
• EPD (Established Pharmaceuticals): Sales increased 7% led by double-digit growth in key 15 markets, with progress in biosimilar strategy.
• Medical Devices: Sales grew 12.5% driven by double-digit growth in diabetes care, electrophysiology, cardiac rhythm management, heart failure, and structural heart. Specific products like Libre (continuous glucose monitors grew 17%), Avera (leadless pacemaker), TAVR, TriClip, etc., contributed to growth.

Guidance

• Confident in sustaining high single-digit organic sales growth and double-digit EPS growth in 2026. Driven by underlying momentum in current portfolio, new product launches, and easing of headwinds like COVID testing decline and diagnostic challenges in China. Expect increasing contributions from new products with balanced innovation.

Risks

• Challenging market conditions in China impacting core lab diagnostics. Tariff impacts on gross margin. Intense market competition in various segments, including diagnostics and medical devices.

Question and Answer

Q: Larry Biegelsen from Wells Fargo asked about 2026 outlook.

A: Robert Ford stated confidence in consensus estimates, citing underlying portfolio momentum, new product launches, and easing of headwinds, expecting high single-digit organic growth and double-digit EPS growth.

Q: Robbie Marcus from JPMorgan asked about diabetes and EP.

A: Robert Ford discussed US diabetes growth dynamics, timing of new product launches, and positive feedback on Volt EP catheter in Europe, expecting EP growth to accelerate in 2026.

Q: David Roman from Goldman Sachs asked about diagnostics business and P&L.

A: Robert Ford and Philip Boudreau discussed diagnostics headwinds in China improving, gross margin dynamics, and progress in tariff mitigation.

Q: Josh Jennings from TD Cowen asked about EP franchise and PFA penetration.

A: Robert Ford explained drivers of ablation catheter growth, mapping franchise performance, and reasonable penetration rates for PFA in 2026.

Q: Vijay Kumar from Evercore ISI asked about China outlook.

A: Robert Ford mentioned China remains important but revenue percentage has decreased, with EPD and nutrition growing double digits, and mid-single digit growth expected excluding diagnostic challenges.

Q: Danielle Antalffy from UBS asked about structural heart and diabetes.

A: Robert Ford discussed left atrial appendage closure product development and diabetes basal penetration barriers, emphasizing ongoing investment and awareness building.

Q: Joanne Wuensch from Citi asked about nutrition litigation and softness.

A: Robert Ford discussed nutrition litigation progress and softness in US pediatric due to competition, expecting share recovery with new product launches and contract wins.

Q: Travis Steed from BofA Securities asked about device business sustainability.

A: Robert Ford discussed device portfolio evolution, repositioning slower growth segments to mid-single digit growth, and confidence in sustainability due to high growth areas and investments.

Q: Suraj Kalia from Oppenheimer and Co. asked about structural heart TAM.

A: Robert Ford discussed structural heart portfolio strength, new product launches, regulatory approvals, and potential for continued double-digit growth in the segment