Abbott Laboratories - Q4 2023

Transcript

Operator (participant)

Good morning, and thank you for standing by. Welcome to Abbott's fourth quarter 2023 earnings conference call. All participants will be able to listen only until the question and answer portion of this call. During the question and answer session, you will be able to ask your question by pressing the star one, one keys on your touchtone phone. This call is being recorded by Abbott. With the exception of any participant's questions asked during the question and answer session, the entire call, including the question and answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's express written permission. I would now like to introduce Mr. Mike Comilla, Vice President, Investor Relations.

Michael Comilla (VP, Investor Relations)

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, to our annual report on Form 10-K for the year ended December 31, 2022.

Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law. On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance. These non-GAAP financial measures are reconciled with the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at abbott.com. Note that Abbott has not provided the GAAP financial measure for organic sales growth on a forward-looking basis because the company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth. Unless otherwise noted, our commentary on sales growth refers to organic sales growth, which is defined in the press release issued earlier today. With that, I will now turn the call over to Robert.

Robert Ford (Chairman and CEO)

Thanks, Mike. Good morning, everyone, and thank you for joining us. Today, I'll discuss our 2023 results as well as our outlook for this year. Before I do that, I think it's important that we take a moment to look back at the challenging environment that we all faced over the last few years, and how our actions during that time have positioned the company to be in an even stronger position today than before the start of the pandemic. In the two years preceding the start of the pandemic, Abbott delivered organic sales growth of more than 7%, which was considered top tier, given the large size of our company. We expected growth in 2020 to be in a similar range, but then COVID-19 arrived and disrupted that trajectory.

While our procedures-driven businesses, such as medical devices and routine diagnostic testing, experienced a slowdown due to the healthcare systems around the world shifting their focus, our branded generics pharmaceutical business was able to stay the course, and our nutrition business accelerated as people around the world placed a greater emphasis on protecting their health. While some companies saw their entire portfolio suffer during the pandemic, Abbott's diversified business once again proved to be resilient. It was also during this time that we created a multibillion-dollar COVID testing business in just a matter of months. That helped play a role in reducing the spread of the virus around the world. COVID testing grew to become a significant part of our portfolio, representing nearly 20% of our sales in 2021 and 2022.

Given the important role that these tests had on society and on our financial performance, COVID testing temporarily altered our identity and became a main point of focus for the general public, our investors, and other stakeholders. But we knew that the pandemic would not last forever, so we planned ahead. We pulled forward or accelerated investments in several areas across the company when the demand for COVID testing was at peak levels, knowing that we would scale these investments back down when the eventual decline in demand for COVID testing occurred. And the experiences we gained in creating the COVID testing business and then managing the rapid scale-up and subsequent scale-down of that business will have a lasting, positive impact on our company. Our R&D pipeline was one of the areas we targeted for the accelerated investments, and we're seeing those investments pay off.

In the last 2 years, we have announced more than 25 new growth opportunities, which include a mix of new products, new indications, and geographic and reimbursement expansions, and this level of pipeline activity is occurring across the entire company. In EPD, for example, we announced an agreement to commercialize several biosimilars in emerging markets. In nutrition, we continue to invest in science-based solutions to address emerging medical needs, with particular emphasis on the fast-growing adult nutrition segment. In diagnostics, we announced approvals for new tests, new instruments, and a new laboratory automation solution. And in medical devices, we announced 10 new product approvals, along with several new opportunities to further improve the growth outlook of the existing portfolio. These new opportunities are well-balanced, with each of our seven medical device businesses accomplishing at least one significant pipeline-related achievement.

Looking back at our performance in 2023, it is clear that these new opportunities contributed to an acceleration in our growth. Both our sales and earnings growth exceeded the expectations we communicated at the beginning of last year. Sales, excluded COVID testing, grew double digits every quarter last year and finished the year up more than 11%, higher than our original guidance of high single-digit growth. Adjusted earnings per share finished the year at $4.44, which was above the midpoint of our original guidance range, despite COVID testing sales coming in much lower than originally forecasted. This is a testament to the strength of the Abbott portfolio and a strong indication of the top-tier, sustainable performance we are positioned to continue to deliver as we move past the pandemic.

Turning to our outlook for 2024, as we announced this morning, we forecast sales growth, excluded COVID testing, to be in the range of 8%-10%, which equates to generating organic sales growth of more than $3 billion. We forecasted adjusted earnings per share of $4.50-$4.70, which contemplates double-digit earnings growth on the base business. I'll provide additional details on our 2023 results by business area before turning the call over to Phil. I'll start with nutrition, where sales increased 14% in the quarter. In pediatric nutrition, double-digit growth in the U.S. was driven by continued market share capture in the U.S. infant formula business, where we are once again the market leader.

International growth of 18% was driven by growth coming from both infant formula products and our PediaSure toddler brand. In adult nutrition, sales for the full year surpassed $4 billion and grew 13.5% in the quarter, driven by strong demand for Abbott's market-leading Ensure and Glucerna brands. Turning to established pharmaceuticals, or EPD, where sales increased nearly 9% in the quarter and 11% for the full year. This is the third consecutive year that EPD sales have grown double digits. Our unique business model of offering broad product portfolios across a targeted set of therapeutic areas that are tailored to the local needs of each emerging market we operate in, continues to deliver outstanding results. Moving to diagnostics, growth in rapid diagnostics was impacted by seasonality related to the respiratory virus testing.

The flu season arrived later this year than last year, which caused sales of flu and other respiratory tests to be lower in the fourth quarter compared to that of the prior year. But in core laboratory diagnostics, growth of nearly 10% continues to be driven by the success of our Alinity suite of systems, paired with our broad test menu offering. Alinity continues to drive high contract renewal rates and competitive win rates. We recently announced that we received FDA approval for our new lab automation system that offers cutting-edge technology to help laboratories increase performance and improve the overall quality of their operations. The system has been available in international markets, and we look forward to offering this to customers in the U.S.

I'll wrap up with medical devices, where sales grew more than 15% in the quarter, led by double-digit growth in six of our seven medical device businesses. In diabetes care, fourth quarter sales of FreeStyle Libre, our market-leading continuous glucose monitoring system, grew 24% and ended the year with global sales surpassing $5.3 billion. In terms of sales dollars, Libre has become the most successful medical device in history, and it has outpaced market growth in 13 out of the last 16 quarters. In electrophysiology, sales growth of 21% was driven by double-digit growth across all major geographic regions, including more than 20% growth in Europe. In rhythm management, growth was led by double-digit growth in pacemaker sales led by Aveir, our recently launched leadless pacemaker that can be used for both single chamber and dual chamber.

In structural heart, double-digit growth in the quarter and full year was led by MitraClip, as well as several recently launched new products, including Amplatzer Amulet, TriClip, and Navitor. For the full year, MitraClip sales grew high teens internationally and 10% on a global basis. In heart failure, sales grew more than 15% in the quarter and 12% for the full year, driven by continued adoption of both chronic and acute circulatory support devices. And lastly, in neuromodulation, sales grew nearly 19%, driven by the recent launch of Eterna, our first rechargeable neurostimulation device for pain management. So in summary, we exited the pandemic in an even stronger position. 2023 was a very successful year. We outperformed our initial expectations on both the top and bottom lines.

The pipeline is generating a lot of new opportunities for growth, and we're forecasting this positive momentum to continue and contribute to the strong growth we're forecasting for 2024. I'll now turn over the call to Phil. Phil?

Phil Boudreau (SVP, Finance and CFO)

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 fourth quarter results, sales increased 2.1% on an organic basis, which, as expected, reflects the impact of the year-over-year decline in COVID testing-related sales. Excluding COVID testing sales, underlying base business organic sales growth was 11% in the quarter. Foreign exchange had an unfavorable year-over-year impact of 0.8% on fourth quarter sales. Regarding other aspects of the PNL, the adjusted gross margin ratio was 55.9% of sales, adjusted R&D was 6.1% of sales, and adjusted SG&A was 26.3% of sales in the quarter. Lastly, our fourth quarter adjusted tax rate was 14%.

Turning to our outlook for 2024, today, we issued guidance for full-year adjusted earnings per share of $4.50-$4.70, which includes an adjusted earnings per share forecast of $0.93-$0.97 for the first quarter of 2024. For the year, we forecast total underlying base business organic sales growth, which excludes COVID testing sales, to be in the range of 8%-10%. Based on current rates, we would expect exchange to have an unfavorable impact of a little more than 1% on our reported full-year sales, which includes an unfavorable impact of approximately 2% on our first quarter reported sales. We forecast non-operating income of approximately $130 million and an adjusted tax rate of 15%. With that, we'll now open the call for questions.

Operator (participant)

Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press the star one one on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star one one 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 one one to ask a question. Please stand by. We compile the Q&A roster. And our first question will come from Larry Biegelsen from Wells Fargo. Your line is open.

Lawrence Biegelsen (Senior Analyst)

Good morning. Thanks for taking the question, and congrats on a nice end to the year here. So, robert pre-COVID, Abbott was growing 7%-8% organically. As you mentioned, you're guiding to 8%-10% today for 2024, off of a higher revenue base. What has changed, and what is giving you the confidence to guide that high to start the year? Maybe talk about the key assumptions, and I'll leave it there for my one question. Thank you.

Robert Ford (Chairman and CEO)

Thanks, Larry. I mean, as I said in my prepared remarks, and quite frankly, as we talked about throughout most of 2023, the impact of the strategy we took to take some of the COVID revenue and reinvest in the base business, I think ultimately that's really the factor here. I mean, we operate in these four business segments, and their underlying attractiveness still is very sustainable. So strengthening our positions that were already pretty strong in each of these four segments was absolutely the right strategy here because we believe that these are important areas of healthcare to be in.

So I'd make the case here that all four of our major businesses are actually in a better and stronger shape than when we were pre-pandemic, which was about $10 billion less and growing at that 7%-8% range. You look at EPD, as I said in my comments, I mean, these are three consecutive years of double-digit organic sales growth. This is probably one of our best commercial teams. They operate in a very challenging geographies and different markets, and they've done an exceptional job at growing the top line and expanding the bottom line. I think even with all the FX and all the challenges that we've seen in those markets, they've expanded their op margin profile by 300 basis points.

So, so it's pretty strong position, strong team, and then we layered in that now a new growth vertical by adding, biosimilars, which historically hasn't been a platform that's been readily available in emerging markets. It's probably been more of a developed markets play. So, so I think that's gonna provide a, a new growth vertical for us there. Nutrition, I think, did an incredible job here, as we said at the beginning of last year, at regaining our leadership position, here in the U.S. I think it speaks a lot about the trust, that our users and customers have for our product. But even adult, our adult business. Our adult business has increased $1 billion since pre-pandemic, and it's just strengthening and getting stronger.

I mean, it's $4 billion growing high single digits. And there's a lot of med tech businesses, Larry, that that command very strong premiums in terms of valuation just by having those kind of growth rates and sizes. So, and we're making investments in that channel also, so. Diagnostics has got a great track record here. Our core lab business has done very well. I've talked about our algorithm and formula here, and framework for growth. We've gotten some recent very large account wins globally here. I think that's the result of our portfolio, and quite frankly, the trust that these customers have in Abbott, and our ability to execute.

Our Rapids portfolio has done very well in terms of placing a lot of new instruments out there for decentralized testing, and we've been making investments on new assays to be able to put through those those instruments, so. And then Medical devices historically, was in that high single digit growth. I think what's changed there to become now a double-digit grower for us on a very large size business, is that you have historically double-digit growth businesses like Heart Failure or EP, Structural Heart, ADC. I mean, those are continuing.

I think what's changed here is that we've taken a strategic look at about 40% of the revenue in medical devices, our CRM and vascular businesses, that were showing very little growth historically, and made investments in them to accelerate their growth rates. I think you saw that in Q4. With CRM, I'd say it's predominantly been an organic play with our leadless platform and technology. On vascular, it's been a combination of adding in organically to the business and organic plays to reposition some of the portfolio to higher growth segments.

So I think that's really in a nutshell, across all these very four attractive segments, we've spent the last couple of years strengthening it, and I think you – You know, you saw that last year, every year, double-digit growth, and they've gotten stronger, and they've gotten better, and they've gotten more growth opportunities with them. So, so I think that's, that's really the driver there. I mean, if you... I've gotten some of the headlines here about accelerating sales, but not seeing maybe that come through in the, on the earnings. Again, this is another one where you look at the impact that COVID had on us and the clouding of it. You know, our core business grew EPS last year 40+%.

We're forecasting double-digit earnings per share growth this at the midpoint, double digit this year. We've got a range around it. I mean, there's a lot of volatility in the world, Larry. So I'd say, yeah I don't have to list all those out in terms of, macro and, and geopolitics, but we've proven to be pretty resilient there, and I think, I think the, I think the range captures the opportunity that we have, on the earnings side. I'd say there's probably more upside than downside in that range, but it's only January, so, I think this is a good starting point.

Lawrence Biegelsen (Senior Analyst)

Super helpful. Thanks for taking the question.

Operator (participant)

Thank you. And our next question will come from Joshua Jennings from Cowen. Your line is open.

Joshua Jennings (Managing Director)

Hi, good morning. Thanks for taking the questions, and echo the congratulations on the strong finish to the year. Was hoping to just follow up on your comments there, Robert, on just the earnings power and just the margin expansion trajectory. I know Abbott is a unique story relative to peers because you didn't have the margin headwinds during the pandemic due to the COVID testing business that you developed internally. But was hoping to just thinking about the pre-pandemic margin expansion trajectory of the business and that 30-50 basis points range, and just hope you just give us a little bit more color on some of the drivers of margin expansion and how your team sees that trajectory going forward in 2024 and into the out years. Thanks for taking the question.

Robert Ford (Chairman and CEO)

Sure. I mean, listen, we hear a lot of companies talk about working here to recover to their operating margin and try to get back to their op margin pre-pandemic. We're in a pretty unique position, I'd say, versus our peers here. Our op margin profile is already at the pre-pandemic level. And I think what you saw us do there, Josh, and I talked a little bit about in my comments, is I think we managed very well strategically, the spending piece of it. You know, we accelerated the spending investments when our COVID sales were at their peak levels a few years ago, and then we held that spending flat these last couple of years.

Even though our top line was growing pretty significantly here. So, I'd say our biggest opportunity for margin expansion really is on the gross margin line. And that is I think about our big five activities this year at the company and we can do all five in the same time, but I'd say gross margin is pretty high up there in our priority. You know, we're forecasting a pretty nice step up in our gross margin profile this year roughly around 75 basis points. and there's a combination of factors that are helping to drive that margin expansion, that profile expansion. We've got a pretty strong track record here of executing on internal margin improvement programs.

so every business has got their programs. We manage those on a monthly basis. They all get reported out, so there's a high degree of visibility and inspection to those programs. Some of the headwinds that we faced, I'd say, over the last couple of years, are starting to turn a little bit into tailwinds. so whether it's commodity costs freight and distribution all those elements seem to be, let's say, right now, and given our visibility for the year as we stand here today turning into tailwinds, so that helps. And then the other part here is just I'd say, portfolio mix.

So as some of the device businesses continue to outpace and continue to grow, those are higher margin businesses, and you know, they provide that that mix element in that gross margin expansion. So I think this provides a nice opportunity for us this year, but I expect over time we'll get back to our pre-pandemic gross margin profile. It's for me, it's not a question of if, it's just a question of when.

You know, if we could target 50-75 I mean, it's never gonna be as linear as we always would want, but that kind of expansion for us, I think, really provides a good opportunity to drive earnings growth over the next couple of years. So, I'd say that's our biggest opportunity. I think we did a really good job at leveraging spending, and I think you see that in our profiles. So, our big opportunity here is gross margin, and we're all over it.

Joshua Jennings (Managing Director)

Appreciate those details. Thanks, Robert.

Operator (participant)

Thank you. And our next question will come from Marie Thibault, from BTIG. Your line is open.

Marie Thibault (Managing Director)

Good morning. Thank you for taking the questions. I wanted to ask a little bit more about your electrophysiology business. That segment has been very strong, and I've been impressed that you've been able to put up that European growth rate in the face of some competitive PFA launches. So would love to hear what's going on behind the scenes there, how you're getting those growth rates, and how you're thinking about the U.S. EP business as we see some PFA launches this year. Thanks for taking the questions.

Robert Ford (Chairman and CEO)

Sure. Well, I think we've showed pretty strong, robust growth in our EP business throughout all the year, even in the face of actual end market competition. It's been strong across the board. I don't think it's just been a Europe story. U.S. has been strong. China has been very strong for us this year, especially in VBP. I mean, there was some price challenges throughout the year with VBP, but the volume we picked up, the market share we pick up, more than offset that. So, it's really been across the board here, and I think it really is about the strength of the portfolio.

so not only having a strong mapping system with our EnSite X, I think is at the core. You know, good mapping disposables and diagnostic disposables also. And I think launching TactiFlex, which is the flexible tip combined with the Contact Force. And we've seen great results, great outcomes, whether it's outcomes to the patient or time of procedure, we've seen that consistently around the world. And then on top of that, I think we've got a great team, really a great team, that is very close to our customers. And yeah, we were able to see the adoption of new technologies. We've talked about some of the shortcomings that exist in those.

So I think it's really the combination of our portfolio and our and our team that really has kind of sustained the growth. As we look to you know more PFA systems that will be in the market this year in the U.S., listen, as I've said, I think it's a great technology. I think there are some challenges with some of these first-generation products. I do expect there to be uptake and usage of it. I think what's been interesting in observing the uptake in Europe is that it is first, at least from what we've seen, it is first seen to have broader adoption in the cryo segment. And then from there, then kind of moving past that. So you know I...

Right now, I think, I guess that's my assumption in the U.S., until I see something differently, that it it will follow a similar pattern. And then the question will just be kind of the speed, but I think the team has done a really good job here, on the ground with the technology.

Marie Thibault (Managing Director)

Thank you, Robert.

Operator (participant)

Thank you. And our next question will come from Robbie Marcus from JPMorgan. Your line is open.

Robert Marcus (Medtech Senior Analyst)

Oh, great. Thanks for taking the question. Robert, maybe I could ask on Libre. You know, this is the most successful medical device. At the conference just a few weeks ago in San Fran, you were talking about really robust growth rates moving forward and targets. You know, maybe you could help us understand where the growth is going to come from in 2024 and beyond. And one question I get a lot from investors is we see the IQVIA script data. It's the best we have. It seems like Libre sales, or at least prescriptions, are flattening out, yet the sales keep growing. How do we think about the discrepancy there, and how big is the Medicare DME business and the growth we're getting there from basal? Thanks a lot.

Robert Ford (Chairman and CEO)

Sure. Strong growth in Q4 under $1.5 billion. U.S. was up 32%. And I'd say, the team still hasn't even had to unleash L3 in the U.S. market in 2023. I think you'll see that now really hit in 2024. But you know, being able to put those kind of growth rates in the U.S. without even having to launch L3 with a competitive new system, I think that speaks a lot about our position, our scale, and our brand. You know, the growth is going to come from... I've been pretty consistent about this, Robbie. I mean, there is a lot of opportunities here for growth.

I'm not going to list them all out here, but I'd say, okay, the basal is a, the basal is a big opportunity. It's a large opportunity for us, but—and I also think it's multiyear. So I don't think it's just a 2024, 2025. I think the penetration into the basal segment is definitely 2+ years easily. And Libre dominates in the pharmacy channel here. I mean, you referenced IQVIA, Robbie. Seven out of 10 new scripts for this patient segment is Libre. And I think that's a testament to the strength and the value proposition that the product has. So it's becoming an increasingly strong growth contributor in the US.

In Japan and in France, where that reimbursement is exclusive to Libre, that's also having a nice contribution on growth. I think right now in the US, most of the population is now covered, whether it's in Medicare, or whether it's in private, private commercial. Medicare represents about a third of the market. So, so I think there's great opportunity here. We just got to build the, build the awareness, build the build the trialing experience with primary care. And that's, that's what we're doing. That's what we have been doing, quite frankly, for some time. So it's a nice opportunity, and it's a, it's a great growth opportunity for us, like... and like I said easily 2+ years.

I think the other part of the opportunity we have, Robbie, is looking at a segment that really hasn't been. We haven't been able to access, which is that of pump connectivity. I think this represents a great opportunity for us. If you look at basal as being a market expansion opportunity, I think the pump connectivity becomes a market conversion opportunity for us. You got 150,000-200,000, I guess, new pumpers every year, and that patient segment has we haven't been able to target it. But now that we've got the regulatory clearings and lists and connecting to all the different pump manufacturers, I think this is a great opportunity for us.

You know, and I think it's good for patients. I think it's going to be good to have a different option, especially for this patient population, where insulin delivery and the whole connected system is important, right? Recently, there was an independent third-party study. I think this is the first time we've seen an independent head-to-head study that was published a few weeks ago, showing that Libre 3 is superior to the recently launched product from our competitor across a variety of different metrics, whether it's bias, whether it's MARD.

So I look at that, and I say, okay, if you're a pump company, and you're wanting to provide the best, best best solution, to your users, that's an important aspect, especially for this segment. So I look at the basal, I look at the pump, as probably good drivers for us in 2024, 2025. but we've got, we've got multiple, growth verticals here, on this platform, like, like I've said. To your question on iqvia I think anybody who kind of follows pharma, and is more attuned to pharma, knows that IQVIA doesn't pick up the entire market.

so the pharmacy channel in the U.S. gets picked up by IQVIA, but there are other segments in the market that drive drive adoption that don't get picked up by IQVIA. So, maybe that's, maybe that's what you're seeing.

Robert Marcus (Medtech Senior Analyst)

Great. Appreciate the thoughts.

Operator (participant)

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

Danielle Antalffy (Managing Director covering Medical Supplies & Devices)

... Hey, good morning, guys. Thanks so much for taking the question. Congrats on a strong end to the year and strong guidance. Just Robert, since this story seems to be very much about line growth, I haven't heard you reference the Fab Five, one of my favorite analogies, in a long time. Just wanted to, maybe I just missed it, but just wanted to get an update on those five products, or where you think you guys are in launch trajectories, revenue contribution for each of those products. Do you still think they're the Fab Five? And where how they sort of factor into the growth, the 8%-10% organic growth for 2024. Thanks so much.

Robert Ford (Chairman and CEO)

Yeah, thanks. I don't know if I regret using that terminology or not now, Danielle, but I guess I would say yes. They are great products, and we didn't think about calling them that because they were gonna be a flash in the pan for one or two years. We look at these as really long-term, great growth opportunities that we have that will significantly add to the company over the next few years. and quite frankly, they have added a good amount of growth for us this year, and they'll accelerate. So I think this year...

Sorry, in 2023, those five products, they represented about half a point of growth, and I expect that to increase in 2024 to about about a point of growth, total abbott contribution. So, they're definitely stepping up. And I'd say some of them, I would call market-creating opportunities. Tricuspid, I would put over there, CardioMEMS over there generating the clinical data, generating the data for reimbursement generating referral pathways. You know, we know how to do this, and we all want things to go pretty fast, especially with med tech products, right?

But with products like this that have such significant growth opportunities there's a certain amount of work that you need to do regarding clinical work as it relates to market expansion, development of, and market development. I'd say some of the other products on that list, I'd say, are probably more market, market conversion, and these are already attractive, large, attractive growth segments, that that we're targeting with our technologies. Navitor in the TAVR space, Aveir in the CRM side. I mean, these are large, large segments that we're coming in, and will have different value propositions. I think Aveir's got a tremendous opportunity.

It's a $3 billion global pacing market, and the value proposition for Aveir, I think, is second to none in terms of its proposition to the implanter, to the patient. So I expect a lot from Aveir in terms of growth. I expect a lot from Navitor, and we're gonna be expanding, so we'll have two new line extensions to Navitor this year, Navitor Vision and Navitor Titan. And so we're investing in those areas, and yeah, they're still great products. They'll still have the Fab Five on it, and they continue to increase.

They'll grow 50%, at least we're forecasting a 50% growth next year, and they'll contribute about a point of growth to the overall company. so that being said, I will say those are great products, and they take a lot of focus, but we still have we still have a lot in the chamber here, too, whether it's Lingo, whether it's our TBI test. We're gonna be launching a nutritional drink for GLP-1 users this year. also we're doing a lot of work on Volt, which is our PFA solution. We put out some announcements already at the beginning of the year regarding our clinical trials. I talked about biosimilars in EPD, our dual analyte sensor for Libre.

We're developing a new Alinity system to target a segment of the diagnostic market that we're currently not competing. So yeah, 5, 5, a lot of great contributions, but there's a lot in the chamber here, and I think that's really what's gonna sustain our growth beyond 2024 and 2025, is just having a robust pipeline.

Danielle Antalffy (Managing Director covering Medical Supplies & Devices)

Thank you. Very thorough. Thank you so much.

Operator (participant)

Thank you. Our next question will come from Joanne Wuensch from Citibank. Your line is open.

Joanne Wuensch (Managing Director, Head of U.S. Healthcare Research)

Good morning, and thank you for taking the questions. A nice start to the year, or nice end to last year, too. So here's a question I have: In nutrition, you've done a great job of sounds like returning to normalcy. I'm wondering if there are pockets that still need to sort of get back on track, or whether we should think of this returning to sort of a mid-single digit segment growth category? Thanks.

Robert Ford (Chairman and CEO)

Yeah, yeah, I think kudos to the team here. You know, we set out a target at the beginning of last year, this time last year, to get to market leadership in our October call. We had already confirmed that, and I'd say over the last couple of months that that continues to expand in terms of our position versus the number two. Yeah, I mean, I think you'll now have the full year effect, Joanne, of having all of that share. And I'd say given the strength of the portfolio of the team and what we went through and the actions that we've taken, I'd actually expect us to actually surpass our pre-recall share.

You know, I don't know exactly when, but that, that'll be my expectation, on that. You'll have a little bit of a partial year impact there of some pricing that we took across the entire nutrition portfolio. So I'd say we're probably above that 4-6 range that we used to have pre-pandemic, at least into 2024. As I've said, I think that we can be at the higher end of that range once everything kind of settles down. And I think a big growth driver for us going forward is really going to be the adult segment, which is growing high single digits and of which we've got very high market share positions across the globe.

This position with the brand we have, the science that we have, really aligns to, I'd say, a pretty sustainable demographic trend that we're seeing, which is just an aging population that is focusing on health care and on nutrition. So, I'd say that's probably an opportunity for us to maybe break out of that higher end 6 range going forward. but I think right now you'll see the impact of the share in the U.S., some partial year impact of the price, allow us to be above that 6% range.

And then as we move into next year what's going to be the impact of some of the launches that we have planned for the adult segment, and what is that going to do for us?

Joanne Wuensch (Managing Director, Head of U.S. Healthcare Research)

Thank you very much.

Operator (participant)

Thank you. And our next question will come from Vijay Kumar with Evercore ISI. Your line is open.

Vijay Kumar (Equity Research)

Hi, guys. Thanks for taking my question, and, Robert, congratulations on a nice Q4 and a solid guide. I guess my one question is on M&A. Looking at the balance sheet, phenomenal position, you at least have a minimum of $20 billion of firepower. Abbott hasn't done any large deals in the last few years. So my question is: How do you see the opportunity for larger sized deals? What is Abbott's appetite for a larger sized, more meaningful transaction?

Robert Ford (Chairman and CEO)

Well, yeah, we've got a strong balance sheet, and it provides us a lot of flexibility on our capital allocation plan. On the M&A side, Vijay, listen, I think it starts off with we've got great pipeline. We have great organic opportunities here to be able to kind of drive top-tier, sustainable growth. So that ends up allowing us to be in a selective position here, where we're not trying to use M&A as a way to kind of bulk up our top line or to cover any kind of top line gaps that might be there. So that allows us to be more selective.

And if there are opportunities that fit strategically, and can generate an attractive return, then, like you said, you've done the math. We've got the flexibility and the firepower to do that. But I'm not looking to acquire businesses simply to make the top line look good. You know, profitability matters. You know, earnings matter. and when you get into these larger sized deals you have to have very strong conviction and understanding of that to be able to generate those returns, and not just look at it as a top line play. I think they're harder nowadays. You know, you look at what we did with St.

St. Jude, and you—and, and we have looked back at the deal model that we put together spot on, in terms of all aspects thereof how we thought this business would would impact the company. So, so, I'm, I'm not discarding anything like that. I'm just providing you the framework that says they're harder to make work if, if, if you want to look beyond just top line, and you want to look at ROICs and all the right financial metrics here in terms of how you deploy capital. And, but I don't feel that we need to do anything like that, to cover a top-line kind of gap.

If we ever did something like that, it was because it would be strategic, and looking at the company kind of long term and not trying to fill a top-line gap.

Vijay Kumar (Equity Research)

Got it. Thanks, guys.

Robert Ford (Chairman and CEO)

Operator. Oh, sorry. Operator, I'll take one more question, please.

Operator (participant)

Thank you. And our last question will come from Travis Steed, from BofA Securities. Your line is open.

Travis Steed (Managing Director, Equity Research, Medical Technology)

Hi, everybody. Thanks for taking the question. So some of the insurance companies are getting surprised by higher procedure utilization, and some med tech companies are kind of calling out above normal growth. So curious, Robert, if you look at your med device markets, are there areas where you think you're seeing some kind of above elevated catch up still coming through? Or do you think this is kind of more normalized growth rates that you're seeing in 2024? Just kind of curious on some of your thoughts on the overall market.

Robert Ford (Chairman and CEO)

Yeah, I don't think that we're seeing kind of any kind of catch up or pent up or anything like that. I think what you're seeing here is more. At least I can speak for our portfolio. I just think you're seeing more adoption of of the technologies, right? so I think there was some disruption, we've talked about it, on some parts of some procedures that require a little bit more pre-op planning or imaging before and imaging after. I mean, I think those that combined with the the labor shortages that occurred 2022, I think that probably slowed a few of them down.

But I don't, I don't think that there was a bolus returning as a result of that. I just, I just think we got back into a normal cadence here of being able to see procedures increasing. We saw that in structural heart procedures, saw that in CRM and EP procedures, not just here in the U.S., but around the world too. So seeing that also in routine diagnostic testing, Travis, a lot of our diagnostic business, a good portion of the diagnostic business, our core lab business, is actually in the hospital. So we also get to see that too. and didn't see a bolus of testing coming back, so we try and triangulate this.

I just see this as procedures are returning back to normal, and because these technologies that are being developed and launched into the market are so, they got such great opportunity to improve care, improve life of patients. I just think you're seeing the return to the adoption, and the adoption curve. You know, some are faster than others, just given, I think, the market and market positions, et cetera. But I wouldn't account for it to be some sort of pent-up piece over here.

Travis Steed (Managing Director, Equity Research, Medical Technology)

Great. Thanks a lot.

Robert Ford (Chairman and CEO)

Okay. Well, I'll wrap up here. And like I said in the beginning very successful year, 2023. In many ways, it sort of represented this transition year, regarding regarding the coming down of COVID. I think we did a really good job at managing the scale up and the scale down. A lot of healthcare companies actually participated and in trying to solve the the COVID problem. And I think we did a good job here at being able to scale up and scale down. Our performance here is now a transition from being driven by COVID testing to, once again, being driven by a broad-based strength across the entire company.

We delivered double-digit organic sales growth on every base business on every quarter, and we're clearly entering 2024 with a lot of momentum. The pipeline, we talked a bit about it, continues to be highly productive. and I'm forecasting here top-tier growth in 2024. and as you look at our range on the EPS guide like I said, there's probably more upside to that than downside. But we're in January, so we're off to a good start and looking forward to executing this year.

Michael Comilla (VP, Investor Relations)

Okay. 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 A.M. Central Time today on Abbott Investor Relations website at abbottinvestor.com. Thank you for joining us today.

Operator (participant)

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.