Good morning, and thank you for standing by. Welcome to Abbott Laboratories' First Quarter 2025 Earnings Conference Call. 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 touch-tone phone. This call is being recorded by Abbott Laboratories. With the exception of any participants' questions asked during the question and answer session, the entire call, including the question and answer session, is material copyrighted by Abbott Laboratories. It cannot be recorded or rebroadcast without Abbott Laboratories' expressed written permission. I would now like to introduce Mr. Mike Comilla, Vice President, Investor Relations.

Good morning, everyone, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer, and Phil Boudreau, Executive 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 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 may affect Abbott Laboratories' operations as 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. 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 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 for 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.

Good morning, everyone, and thank you for joining us. As we progress through 2025, it is clear we are operating in an increasingly dynamic environment. Abbott Laboratories was built not just to operate, but to succeed and rapidly evolve in environments like this. We have consistently demonstrated our ability to navigate complexities arising from a range of global circumstances, including the repercussions of a global pandemic, global financial crisis, numerous geopolitical events, just to name a few. And the current evolving economic environment influenced by new tariff policies represents another global development that we are prepared to adeptly manage. The proven benefits of our diversified business model are evident now as a result of the strategic framework that drives our global manufacturing and supply chain operations. While tariffs will have a financial impact, with ninety manufacturing sites around the world and decades of experience executing our global network strategy, we're well-positioned to implement mitigations to help manage the impact of the tariffs. I'll now shift our focus to discussing our results for the quarter. Overall, we achieved our target growth objective, delivering high single-digit sales growth and double-digit earnings per share growth. First quarter sales grew 7% or more than 8% excluding COVID testing sales. First quarter adjusted earnings per share of $1.09 grew 11% versus the prior year and finished at the high end of our guidance range. I'll now summarize our first quarter results in more detail before turning the call over to Phil, and I'll start with nutrition. Year sales increased 7% in the quarter. Growth in the quarter was driven by high single-digit growth in adult nutrition and double-digit growth in US pediatric nutrition. In pediatric nutrition, our relentless focus on research, innovation, and product quality continues to make our Similac family of products the number one choice for parents in the United States. In adult nutrition, growth of 8.5% was driven by growing demand for Abbott Laboratories' Entra family of products, which serve as a source of complete and balanced nutrition for people with a wide range of nutritional needs. Moving to diagnostics, sales declined 5% in the quarter due to the year-over-year decline in COVID-19 testing sales resulting from a much weaker COVID season, which primarily impacted growth in our rapid diagnostics business. In core laboratory diagnostics, low single-digit growth in the quarter reflects the impact of volume-based procurement programs in China. Excluding China, core laboratory sales grew 6.5%. And wrapping up in diagnostics, we remain on track to go live by the end of the year with two new manufacturing and R&D investments in Illinois and Texas, totaling half a billion dollars related to expanding our US transfusion diagnostic business. Our transfusion business is responsible for screening the US blood supply. Our current blood screening system, Validity S, runs diagnostic tests to identify if there are antibodies and antigens that may be present in donated blood. We have developed a new system called Alinity N that will allow Abbott Laboratories to enter the molecular nucleic acid testing segment of the blood screening market. This advanced technology is capable of detecting DNA and RNA of several diseases that could potentially contaminate blood donations. The nucleic acid testing market opportunity is estimated to be around a billion dollars and represents an attractive new growth opportunity for our business. Turning to EPD, where sales increased 8% in the quarter. Growth was broad-based across the markets we serve, led by double-digit growth in more than half of our key fifteen markets. We continue to make great progress on building a best-in-class portfolio of biosimilars that spans across several large and attractive therapeutic areas. In January, we entered into an agreement that provides Abbott Laboratories commercialization rights to four additional biosimilars across emerging markets in Asia, Latin America, the Middle East, and Africa. Through the various collaboration agreements we have executed, we have now added a total of fifteen biosimilar products projected to contribute to sales over the next three years. And I'll wrap up with medical devices, where sales grew 12.5%. In diabetes care, sales of continuous glucose monitors were $1.7 billion in the quarter and grew more than 20%, including growth of 30% in the United States. In electrophysiology, sales grew 10%, which included double-digit growth in the US and high single-digit growth in international markets. In March, we announced that Abbott Laboratories obtained CE Mark earlier than expected for our Volt PFA system to help treat patients battling atrial fibrillation. We have already initiated the launch of Volt and will further expand the rollout across European markets over the course of the year. In structural heart, growth of 15% was driven by strong performance across our market-leading portfolio of surgical valves, structural interventions, and transcatheter repair and replacement products. Growth in the quarter was led by continued share gains in TAVR and growing adoption of TriClip. In March, new two-year data from the Trilumet clinical trial was presented at the American College of Cardiology Conference. The data showed that patients receiving TriClip had a statistically significant reduction in the occurrence of heart failure-related hospitalizations along with sustained reductions in tricuspid regurgitation and life-changing improvements in quality of life. In Rhythm Management, growth of 6% was led by consistent and sustained market penetration of Aveir, our innovative leadless pacemaker, and Assert, our newest implantable cardiac monitor. In heart failure, growth of 12% was driven by our market-leading portfolio of heart assist devices, which offer treatment for chronic and temporary conditions. In January, CMS issued a national coverage decision to cover CardioMEMS, a small implantable sensor that provides early warning indications to help doctors treat heart failure. This expanded coverage will broaden access to CardioMEMS for those with Medicare Advantage plans and help further expand coverage to those with commercial insurance plans. In vascular, growth of 6% was led by double-digit growth in vascular imaging and vessel closure products, and growth from Esprit, our below-the-knee resorbable stent. In March, we announced the start of our US pivotal trial to evaluate our coronary intravascular lithotripsy system in treating severe calcification in the coronary arteries prior to implanting stents. We expect to complete enrollment in this trial next year and file for FDA approval shortly thereafter. We look forward to entering this large and fast-growing segment of the coronary intervention market and expect this to become a meaningful growth driver for our vascular business. Lastly, neuromodulation. We began treating patients in our TRANSCEND clinical trial, a first-of-its-kind trial designed to evaluate using deep brain stimulation to address treatment-resistant depression, which represents a market opportunity exceeding a billion dollars. So in summary, we delivered another quarter of top-tier performance. Sales grew high single digits, and earnings per share grew double digits. We expanded gross margin by 140 basis points and operating margin by 130 basis points compared to the prior year. Our pipeline continues to provide a steady cadence of new growth opportunities, with more than 25 key new products forecasted to launch over the next three years. We are on track to deliver on the financial commitments we set at the beginning of the year. I'll now turn the call to Phil.

Thanks, Robert. As Mike mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis. Turning to our first quarter results, sales increased 6.9% or 8.3% when excluding COVID testing-related sales. Adjusted earnings per share of $1.09 increased 11% compared to the prior year and finished at the high end of our guidance range and above the consensus estimate. Foreign exchange had an unfavorable year-over-year impact of 2.8% on the first quarter sales. During the quarter, we saw the US dollar weaken, which resulted in a favorable impact on sales compared to exchange rates at the time of our earnings call in January. Regarding other aspects of the P&L, the adjusted gross margin profile was 57.1% of sales, which increased 140 basis points compared to the prior year. This increase was driven by delivering on the underlying organic margin expansion we forecasted and also included an added benefit of more favorable fall-through from foreign exchange. Gross margin expansion has always been a significant element of company culture. At any point in time, a substantial number of margin improvement initiatives are underway that span across our businesses as well as our functional areas, including supply chain, marketing, and other administrative groups. I'd like to take a moment to acknowledge the valuable contributions from our Abbott Laboratories employees around the world who are driving these exceptional margin expansion results. Turning our focus back to the first quarter results, adjusted R&D was 6.7% of sales, and adjusted SG&A was 29.5% of sales in the first quarter. Adjusted operating margin was 21% of sales, which reflects an increase of 130 basis points compared to the prior year. Based on current rates, we now expect exchange to have an unfavorable impact of around 1% on the full-year reported sales, which includes an expected unfavorable impact of around half of a percent on the second quarter reported sales. Lastly, for the second quarter, we forecast adjusted earnings per share to be in the range of $1.23 to $1.27. With that, we'll now open the call for questions.

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 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. Please use your speakerphone when asking your question. And our first question will come from Robbie Marcus from JPMorgan. Your line is open.

Oh, great. Good morning. Congrats on a good quarter and thanks for taking the questions. Robert, I'll just ask them both together since they're sort of related. First, on the full-year guidance update, it looks like it moves a little lower when you back out the or it stays the same when you back out COVID tests but moves a little lower including that. But you were able to hold EPS for the full year even including the recently announced tariffs. And I guess that's the elephant in the room is tariffs. So maybe you could walk us through the impact of that, how it hits the balance sheet and P&L timing. You know, we're all trying to figure out what does it look like on a full year. So maybe some of the offsets you talked about, the flexibility in the manufacturing footprint, how you're using that to your advantage. And I'll leave it there. Thanks a lot.

Sure, Robbie. I mean, listen, I think the maintaining of our guidance range, you know, we've had a great first quarter here and achieved what we wanted to achieve from, you know, a target growth perspective. You know, high single-digit sales growth, double-digit EPS growth. We talked about getting back to that formula and, you know, excluding COVID testing sales, which I can tell you right now are our lowest gross margin product, you know, we grew over 8%. So I think on the top line, everything that we've kind of put in place we feel very good about as evidenced in our first quarter. Gross margin expansion is a key element of our plan to get back to double-digit EPS. To your question on tariffs, it's going to be an important muscle to exercise here in really strong performance here. I think we guided 70 basis points of improvement, then we saw about 140 in the first quarter. So really strong performance for the team there. And then the pipeline to kind of sustain the growth, Robbie, I think you saw a lot of activity this first quarter, whether it's the Volt CE mark, beginning of our IVL trial, the NCD for CardioMEMS, the new data on TriClip. So there's a lot of great activity there when you think about kind of how we guided in the beginning of the year, everything is pretty certain for us in terms of how we're executing and the expectations we have from the products. I guess the only aspect there of maybe some uncertainty that you raised is the tariff piece. And, you know, I'd say prior to tariffs, prior to the whole tariffs, we were even considering given the momentum that we were seeing in the base business, you know, we're even considering raising our EPS guidance. But, you know, tariffs are here, so we felt reaffirming our guidance is already, I think, a pretty strong statement. We've completed a pretty strong assessment of every possible different type of scenario. Not just in what it could how it could impact us, but more importantly, Robbie, how what are the different scenarios to be able to mitigate it? So the team has been working, call it, very diligently. I think we only took a break over the weekend to watch the playoff hole, and then we went right back to it. I can tell you, we feel very comfortable right now with the information that we've got and obviously looking at potential scenarios that could arise down the road that we can cover an impact of tariff, which I'd say really two geographies, the United States and China. So right now, we estimate the tariff impact in 2025 to be a few hundred million dollars. That's a half-year impact because I don't see any impact in Q2. And then we start to kind of see the impact happening in Q3. But there are other items here that I'd say are variables related to the tariffs that help offset. I can tell you there's not a lot of R&D slowing down or SG&A slowing down in those mitigation plans. But there are other variables to consider here. FX, we could see what's going on with the dollar as this discussion of tariff is ongoing. Interest rates, tax, there are a lot of, let's call it, levers that, you know, we've got at our disposal, put it this way, to be able to mitigate. Our job here is to manage this in the aggregate and contemplate and contemplate here, you know, trade-offs of the decisions. You know, we're working on I think the key thing here that as we're going through it over the last ten days is there are definitely short-term things that can be done to mitigate and close the gap. And we will be looking at those and delivering on those. But I think more importantly, Robbie, is how can you actually look at these on an ongoing basis? You know, one thing we have learned from tariffs is they don't go away. So whatever comes, it stays and stays for a while. Look at the tariffs that went in place in 2017. They're still there. So we need to think about how do you mitigate this more in a long-term sustainable way. So, yeah, you can use a balance sheet and you can build some inventory, and we'll probably do some of that. But if your entire strategy is building inventory, guess what's going to happen in 2026 or whenever that inventory runs out? So we're really looking at the manufacturing network and optimizing it. As I said in my comments, prepared comments, we've got ninety manufacturing sites across the world. We have the manufacturing strategy and framework that's been in place for decades, Robbie. And, you know, they weren't it's a framework that hasn't been put in place because of tariffs. But it's going to serve us well that same framework when we think about more long-term planning for tariffs. So, hey, I understand the temptation that many of you will have just to, you know, take this number that I've given or a few hundred million dollars and then just double it as an annualized impact, I think it's a little bit too early to do that. Like I said, our manufacturing network has got the ability on a more long-term basis to communicate this considerably. And you just got to have intent. You got to have a balance sheet, obviously, to be able to make the CapEx investments. Some of them take longer. Some of them you can do pretty fast. I mean, think about what we did during COVID, where we built three ISO-certified GMP clean remediators manufacturing. We did it in, you know, three months. So, you know, there is opportunity to do that also. But I think the key thing here is, you know, how do you balance the short-term, the medium-term, and the long-term? And we're not putting everything in a short-term even though we are going to leverage, you know, some of those variables that I talked about, FX, interest, tax, etcetera. But we're really focusing on how to mitigate this going forward. So thanks a lot.

Thank you. And our next question will come from Larry Biegelsen from Wells Fargo. Your line is open.

Good morning. Thanks for taking the question. Hey, Robert. Just wanted to focus on the EP franchise. You know, we're headed into the Heart Rhythm Society meeting next week. You just got approval for Volt in Europe. You put up a nice balanced quarter here. So maybe just kind of give us a kind of a state of the union and your, you know, how you're feeling about that business in 2025 and beyond, and just remind us of kind of the US approval timeline for Volt. Thanks for taking the question.

Sure. Well, listen. I've always felt bullish about our strategy. I think many of you in your reports a couple of years ago probably wouldn't have anticipated that, you know, last year with all the PSA that we would have been the second fastest-growing competitor. And that's basically the strategy that the team delivered, but more importantly, the execution of it. So I think we had great success, and you saw that success continue into Q1, you know, without Volt. So I think the announcement of Volt was a little earlier than we expected, and that's a good thing, obviously. And, you know, the initial feedback that my team has shared with me has been very, very positive. Obviously, we're going to start with a rollout where we'll focus a little bit on the users that were part of our clinical trial, and then we'll start to ramp up that as we go into the second half of the year. I think the data that presented at the European part of the meeting was very strong. It stacked up very well against the other products. Obviously, it's always difficult to compare, you know, trial to trial. There's different, you know, patients. There's different kind of protocols. But I think in general, the data that presented was very strong. And then I think the integration here is key. I think we continue to be the market leader in the mapping of PFA cases. At least that's what we saw in Q1. And so we've got a built-in scale and capability here to drive, you know, to drive the adoption. I think that, you know, some of the advantages that I think our product has, we talked about not just the integration, but I think the balloon feature is perfect for PBI. A lot of stability, optimizes contact. As I think we've said, not only in conferences, but I also said, I think we think contact matters and visualization of contact matters. I think there's less muscle contraction, especially with lower anesthesia or the use of just sedation. So anyways, I think the product's going to do really well. I think it's going to do what we intended it to do. Related to timelines here in the US, you know, we'll be reporting data out and, you know, we'll be submitting it this year and, you know, I'm very optimistic that, you know, we should see an approval, you know, as I'm cautious here, Larry, because I hate giving predictions. But, you know, I'd say right now, our timeline is, you know, probably beginning of next year. Might be surprised on that, but I think that's a good kind of base case to have. And then the investments in the business are going very well too. I think the teams have done a really good job, not only with the mapping and the infrastructure we have out in the field, but also the R&D focus there. We've completed enrollment of our FocalFlex trial for CE Mark, and, you know, that's combining the RF and the PSA on the TacticFlex catheter. So I feel good. I feel good about where we are. I feel good about what the team's doing. You know, and as we accelerate the launch of Volt into international markets in the second half of the year, I think I said in the beginning of this year, I think the second half of the year will be better than the first half.

Thank you. Our next question will come from Travis Steed from B of A Securities. Your line is open.

Hey. Thanks for taking the question. Just a few follow-ups on the tariff side. For the few hundred million half-year impact, just want to make sure that assumes kind of current rates as they are today and, you know, curious if assume China is probably the bigger portion of that. I don't know if there's any color you could kind of give on how you got to that impact. But it sounds like you really don't want us kind of to run rate down into 2026 yet because you think there's a lot of offsets. And when you think about the offsets, curious, you know, is network protocol included in that? Do you think kind of the diabetes business fits under that protocol? You know, how much of this can you offset with pricing? But you think a lot of the offsets are really going to be around moving around manufacturing and changing around the supply chain.

Yeah. Sure. I think a question on FX rates, yeah, we're making an assumption that on that mitigation as rates are as of today, you know, there you can make an argument. Some of them have kind of gotten even the dollar has gotten even weaker versus some of them. So, yeah, we're making that assumption. Regarding US and China, you know, I'd say right now on that initial forecast, I'd say there's I'd say that's pretty evenly split. But I think as we think about mitigations more long-term, I think we've got opportunities across both of them. I think one thing that is important to keep in mind is we've always had a view with our manufacturing framework. And, like I said, this has been in place for decades. Two key tenets here, Travis. One, align the manufacturing as close as possible to the customer and then have an appropriate amount of redundancy. So, you know, the advantages of being close to your customer, I mean, you can get efficiencies and a lot of cost advantages there. It allows you to tap into local talent. But more importantly for us, it's always when you match your against FX. So it doesn't do much for it to protect the top line, but it definitely helps protect the EPS. And so a very large percent of our sales here in the US are sourced from US products. And then we try and mitigate risk by spreading that manufacturing network out. So a good example of that is Libre, for example, where we've got six manufacturing sites for Libre, a total of six. And of those six, two are in the United States. And obviously, those manufacturing in the United States serve the US demand. And then the other sites outside of the United States service OUS demand. We did that with COVID too. Binax was made in the US for the US, and Panbio was made outside the US for international markets. So that's going to allow us to kind of mitigate a lot of this. You know, if we had put all of our manufacturing in Southeast Asia or put all of our manufacturing in Europe, then that might be a little bit more complicated. But we've always had a view of kind of being able to spread it out and mitigate the risk that way. You know, tariff wasn't on the list of risks, but, you know, it provides a lot of maneuverability on this. So, yeah, I think you mentioned, you know, different opportunities to be able to, you know, offset impacts. Yeah. You mentioned one, but there are lots of other opportunities to do that. And, you know, we're looking at all of those. Those, you know, those help. Those help to be more sustainable, but, you know, somebody could decide to not want to be part of those agreements. So we've got to really leverage the manufacturing network that we have if you really want to make it sustainable. And I think those are the two areas that we're going to be looking at. And focusing on those two markets.

Thank you. Our next question will come from David Roman from Goldman Sachs. Your line is open.

Good morning. Thank you for all the color here on tariffs. Obviously, a topic we're watching very closely. Maybe you could switch over to some of the business performance metrics here. And could you maybe talk to us a little bit about the broader diagnostic strategy here, certainly understanding the unique dynamics of VBP influencing the business in China. If you think about where you're positioned and how you accelerate this business back toward end market growth, what are the key products that can help you do that? And are you thinking about M&A in this category to support a turn in the growth rate?

Yeah. Sure. Listen. Yeah. A little disappointing on the diagnostic side. Yeah. Part of it was COVID, but, you know, we've also got some improvements to be made here. I'd say specifically in China, David, your point, I mean, we're seeing growth in our business. In our diagnostic business everywhere except China. Outside of China this quarter, we grew around 7%, which has been in line with our Core Lab overall growth rate. US grew 7%, and if you remove kind of the capital piece and just focus on the consumables, it was over 8%. EMEA grew 7%, Latin America grew mid-teens. Our transfusion business grew 7%. So I think we're seeing good performance here. It's really been a challenge here, as I mentioned, as you mentioned, which is China. And it's really price-driven. On VDPs. I think if you look at what's happened in other VDPs, at least the ones that we've been part of, when you bid on those businesses, yeah, you have a price hit, but you have an offset because you're part of a smaller group of competitors who are picking up volume. This one here was very different in that everybody, all manufacturers, stayed on the market, maintained their contracts, but we took these price hits. So we're really here faced with the price hit and no volume offset. So the team is doing a good job right now. Let's say, at navigating this. We're going to have to do better in some of the other geographies, and I know the teams are looking at how to accelerate even more our growth rate in the other markets. It's a delicate balance. You place a lot more capital, and that's going to hit your gross margin. So we've kind of looked at this being a kind of a, you know, between a 7% to 9% growth where we can grow above the market and still expand margins. So the team is looking carefully at how to do that, but offset some of that challenge coming out of China. We're just going to have to go through this. And still an important market. It's still got good profitability, but you're just going through the cycle here. Of VBP that is a little bit different from what we've seen in the past where you don't have the volume offset. Your question on M&A, yeah, this is a, you know, we believe diagnostics is critical to health care. Seventy percent of health care decisions involve a diagnostic test. Which is why we've been investing in this business. Talking about expanding our portfolio in the blood bank business with the nucleic acid testing system. I think that's going to be a great opportunity for our business. We're excited about, you know, showing the product to our customers this year and start working on really composing an offering here that you can have both serology and nucleic acid testing, you know, with Abbott Laboratories. Combined with all the automation and all the other digital services we provide, we think it's a real strong offering there. Other opportunities in diagnostics. Yeah. Sure. There are. I've been public about areas that we would be looking at in the M&A world being medical devices and diagnostics. But, you know, we've got opportunities to do that, but we've also got opportunities to do it organically.

And maybe just a related follow-up on that last point. I think on the last call, it sounded like M&A might become a more important part of your capital allocation strategy. Maybe just update us on how you're thinking about that and any comments on how NEC might be influencing capital deployment priorities?

Absolutely no impact whatsoever on capital allocation priorities and update on commentary on M&A. I mean, David, there is no update in the sense that the mindset hasn't shifted. Right? Which is yes, we're looking at opportunities in devices and diagnostics. Yes. We have opportunities to add to our business. We've got a strong balance sheet to be able to do that. We're going to look at things strategically. We're going to look at things also from a financial lens. We can be selective in the sense that we feel that we've got a growth model here that allows us to sustain this organic growth rate, this high single-digit organic growth rate. So it allows us to ensure that we're not only being strategic about it, but we're also being disciplined about how we're thinking about it. As I said, ROIC matters to us. Profitability matters for us. I think even more important in today's environment. Protecting your EPS, protecting your profitability, I think, is important. At least for us, it's going to be important. So regarding an update on M&A thoughts, there's no update on our thinking, on our framework.

Our next question will come from Vijay Kumar from Evercore ISI. Your line is open.

Hey, guys. Congrats on a nice print here and thanks for taking my question. Robert, just on maybe the top line here. The 7.5% to 8.5% organic, which is that's pretty impressive considering the macro. What drives the back half acceleration rate when we look at Q1 starting point of 7%? Are we looking at, you know, Volt is, you know, stepping up or is this China, which is, you know, assuming China improves in the back half? Maybe walk us through it from Q1.

Yeah. I mean, I think it's when we guided back in January, Vijay, we kind of guided to this, you know, second half better than the first half. And there's a couple of things there. First of all, I think you've got the impact of new kind of product launches kind of ramping up. And that obviously contributes to the growth rate in the second half. You mentioned one product, that's one. But as you're familiar with our pipeline, we've got a lot of recently launched products that as you go scaling up, you know, that scale goes building, and then it goes accelerating. So I think that's a key driver. And then the second part, I'd say is comps. If you remember, you know, the VBP really started to really impact us, you know, kind of last year, you know, Q3, Q4. So I expect that, you know, lapping some of those VBP components and diagnostics will be a contributor. And then if you remember also last year in Q3, we had some challenges on our nutrition business. Just some commercial execution challenges that we had a pretty big significant kind of drop in our nutrition, in our international churn of, you know, regaining the share in some of those markets. And so that's the other component I would say is, like, you know, these are two pretty big comps. If you look at Q3, you know, that was a pretty kind of low point, I'd say, for our nutrition business in the year. So that's kind of high level how the math works.

Understood. And maybe one on the gross margins here. I think the prior guide is perhaps 60 to 80 basis points step up. Is the, I guess, the tariff, is that hitting gross margin? Is that a COGS impact? How should we think about gross margins here for the back half?

Yeah, Vijay. It's Phil. And, yes, exactly, you highlighted here. We guided a strong gross margin into the year after nice sequential growth each quarter last year and very pleased with Q1. Delivering on that actually being a little bit better than what we had modeled or forecasted here, along with the benefit of the FX movement. Here. So those help serve as some of the offsets to the tariffs, which would largely be felt in the gross margin.

Thank you, and our next question comes from Joanne Wuensch from Citi. Your line is open.

Good morning, and thanks for taking the question and all of the information. I'd like to pivot a little bit to some of the products and particularly the IVL product, which you announced you've begun clinical trials for. And on a second question, some of your structural heart products, this is another quarter of double-digit revenue growth in that segment. That would be great. Thank you so much.

Sure. It's great to talk about products a little bit, Joanne. So thanks about that. Yeah. So your first question on IVL. Listen, we're excited to enter this category. This is a billion-dollar opportunity right now. We think we see there's a lot of growth. If you remember, this asset came to us through the CSI acquisition that we did a few years ago. So, you know, we saw this as a, like, a really interesting asset that was in there that we could kind of add value. The team's been working on it, and it's great to see that we started to enroll patients in the trial. It's too early to think about kind of timelines here. Like, precise timelines from a quarterly perspective, but I expect to complete enrollment of this trial next year and file for approval next year. I think the catheter that's been that we put into the trial is being viewed as very easy to deliver. And seems like a great tool here to treat severe calcification. So, I've gotten, like, early data on kind of the first cases. They seem to all go very well. You know, praise from the interventionists on the deliverability of it, and I think that's always an important part given our experience in the world of stents. Deliverability is super important. So that's it seems like it's hitting the mark there. And then we also know that there's, you know, obviously, a peripheral market for this. If you think about our portfolio in our vascular business, this would complement it also very well. So I know the team's working on a peripheral program there too, and we'll provide updates on that as we progress. But, yeah, excited about the opportunity. I think it's going to be a meaningful growth driver here for our vascular business, which we've already started to see an improvement on the growth rate. And this will obviously help sustain it. Yeah. On your question on structural heart, yes, 15% growth. We've always talked about, Joanne, this being like moving away from being a single product company and MicroClip to be a full portfolio product. And the investments that we made in R&D during those years post-integration of St. Jude and really kind of building a best-in-class portfolio here, I think is going to pay off. It's paying off now, and I think it's going to pay off long-term also. Navitor is doing really well. We've talked about, you know, the opportunities that we have in TAVR, good share gains in Europe and looking forward to see this investment that we've been making in the US in terms of building our commercial presence, expanding it, looking forward to see that team be able to start to really gain momentum as we progress throughout the year. Keep in mind, we're only in 25% of the cases. It's 5% of the implanting hospitals here in the US. So I think there's a great opportunity for us there. And then, TriClip is another one that has been doing very well. The launch continues to go super. In terms of market share, I think TriClip here is now clearly the preferred option. Safety plays a major role in deciding what to choose and, you know, the safety record here is pretty excellent, not just in the clinical trials, but also in the real world. So I expect this to annualize at around a quarter of a billion dollars but really gaining a lot of momentum as we exit the year for a couple of things. One, we were launching a next generation of TriClip, and it's going to further enhance the ease of use. It simplifies all of the prep work. I've been to a couple of cases, and it's not a pain point, but it's just a nice thing to have to be able to reduce some of that device prep work before. So I think the team's done a really good job there. We also saw the CMS publish their end. I expect that to hit midyear, and that's another great opportunity. But the two-year data, I think, was pretty significant at ACC and really showed, you know, I know there's a lot of question marks about, you know, the endpoint a year ago, but, you know, that really was empowered for one year. You know, and you're starting to see now the benefits on that hard data come out. I think that plays a huge role when you got the safety and you got the hard endpoint. So all in all, I think the structural heart business is going to continue to be in these teen growth rates. And we got opportunities for international expansion too. So and then plus all the R&D work that's ongoing, whether it's balloon expandable, you know, next generation MitraClip, next generation TriClip, next generation Angulet. I mean, it's just really stacked up, and the team's doing a good job. So looking forward for that business to continue to be a contributor in the next few years.

Excellent. Thank you so much.

Thank you. Our next question comes from Josh Jennings from TD Cowen. Your line is open.

Hi, good morning. Thanks for taking the questions. Robert, I was hoping to maybe a little bit early for this, but was hoping you could share either what Abbott Laboratories is doing individually or plans to do along with conjunction with AdvaMed and industry to potentially seek exemptions in the US, China, Europe. And should investors hold out hope that exemptions for the medical devices industry specifically could be secured.

Hey, Josh. I mean, you know, Abbott Laboratories, hope is not a strategy for us. So I would stick away from that. But are we talking with industry association sharing data, sharing information? I think the key thing here is always just getting some of the facts and the data is always important. And I think that's obviously an opportunity that exists to at least make sure that everybody who's making decisions is aware of the facts and data and the implications. So are we actively involved with AdvaMed? Yes. We are. But I also think that, you know, we have to the med tech industry, and you guys know this, is, whatever, six fifty million dollars, seven hundred billion dollars kind of industry, US companies, you know, have a very high share of that global industry around at least over 50%. So I think it is in the interest of the US to make sure that we protect the innovation, that we protect the investment in R&D. And a lot of the manufacturing in med tech is done, I would say, mostly in the US already. So yes, there's opportunities to have conversations, and that's part of our strategy. But hope is not one of them. So we're, you know, we're working through weekends and thinking about how we're going to do this on a long-term basis.

Understood. Thanks for that. And then just one follow-up. You know, I know the macro conditions are evolving rapidly. There have been some events Abbott Laboratories specifically with the NEC litigation over the past twelve months. Just was hoping for an update on how you and your team are thinking about the diversified model at Abbott Laboratories. It served the company well for decades. But any updates just on the potential to unlock value, a number of other competitors have been either divesting or spinning out business units. I was hoping to get your thoughts here in early 2025.

Sure. I mean, you threw a couple of things in there. You know, the fact that we had this ongoing litigation on NEC doesn't necessarily kind of lead us down a path of, you know, whether businesses are here to drive value or not. So I'm going to move the litigation piece aside here, to be quite honest with you. Listen, we've always looked at the value of our diversified model. As long as you're in the right places, it provides a lot of shots on goal. And then it allows us to manage through moments of uncertainty, you know, in the global market. And I made reference to that in my opening statements. And we've shown plenty of examples of how that model has actually helped us. The key thing here is, you know, are these businesses operating at the highest level? And are we driving the value through them? I mean, you guys can do some of the parts. I think that we're pretty fairly valued, I guess, if you were to kind of do that analysis. You know, there's always going to be a little bit of a disconnect there. But I think we're operating as businesses each at the highest level. And, you know, I think they provide us with a strategic advantage that very few health care companies have. We have a unique perch where we get to see the entire spectrum of health care through nutrition, through diagnostics, through pharmaceuticals, through medical technologies, and we think that's a competitive advantage. But we look at our portfolio always on an ongoing basis. We continue to evaluate whether there's an opportunity to create value. I talked about these questions we ask ourselves. Is there an opportunity to create value? And is there somebody else that could, you know, be a better owner of our business? And for me right now, those two questions are no. They're not. And we just got to keep driving and executing, and I think you've seen, you know, you've seen us as a company. You know, we've engaged in these probably long before. These were, you know, these were the portfolio moves to juror, I'd say, that we're seeing right now. I got to get to ask yourself some of these moves, have they created value to shareholders? So I think that's always a fundamental question.

Thank you. Mike, we'll take one more question, please.

Good morning. Thanks for squeezing me in. I wanted to ask a question here on Rhythm Management. I think this is the second or third quarter that we've seen really strong results, particularly in the US. And I assume some of this is because of Aveir. Can you catch us up to date on where we are in terms of the rollout? Some of the new data we might be seeing at HRS on left bundle branch. Some of the other opportunities we should be seeing there in Aveir. Thanks.

Yeah. Thanks, Marie. Yeah. I listen. I think Aveir remains one of the probably one of the most underappreciated opportunities here in our portfolio. I think rarely do you have an opportunity to completely change the standard of care. And I predict that we're going to see that standard of care change in the at least in the pacing market. You know, next five years. I think that the majority of the market is going to be leadless. And I'd say that the key thing for us was to think about, okay, if we think that this is going to be a complete change and change in paradigm and standard of care, we got to make sure that we build a strong enough foundation for that to happen. It is a different implant technique that have been accustomed, have been trained for, you know, decades. So as I've said, we were going to go, I guess you could say we're going to go a little slower to go fast. If you couldn't argue what we've been doing. I mean, I think this will probably exit the year at about half a billion dollars. So I think the teams have done a really good job at establishing that foundation. We've seen an increase in accounts. So we've increased our accounts by about 50%. The amount of physicians that have been trained have been increased by 50%. We've more than doubled the amount of implants per day we're doing. Now, that's not just the expansion of new accounts, but we've actually seen a 30% increase in the monthly implants of the early adopters. So not only are we increasing the penetration to new accounts, but we're also seeing deeper penetration and usage in the accounts that we've already opened. So that gives me confidence that, you know, on the statement that I made that I think this is going to be a complete change in category. And so much so that we've been obviously investing from an R&D perspective on next-generation leadless products. We're going to have a next-generation version come out we're working on that's going to increase the battery life by about 25%. So that's going to be good and important as we think about more increased penetration, you know, younger implants, younger population implants. And then we also talked about developing a leadless conduction system pacing product. This has got a breakthrough designation by the FDA. I'm not going to get too ahead of me in terms of HRS, what you'll see, but our goal is to start the pivotal trial for this product in 2026. So the point here is we believe this is going to fundamentally change. We've made the investments to prepare the market, train the market, condition the market, and we're also making investments in the pipeline also because we believe that's where the standard is going to go. So I think if you looked at our CRM business, you're seeing the impact of that strategy, which is, okay, this has been a business that historically has been flat from our perspective in a single-digit kind of growth market. Over the last couple of years. Thank you for pointing that out. We've been growing around 7%, and I think it's really part of the strategy. So we look forward to HRS. We look forward to, you know, what we're going to be presenting across the entire EP portfolio, not just on the CRM side. On the structural side and also on the ablation side. So I think we're going to have a real good HRS and good data there too. So listen, I'll just I get that there's a lot of questions on tariffs. We've been doing a lot of work, a lot of modeling, but more important, a lot of ways to think about how to mitigate the impacts. Part of my push to the team and push to myself, quite frankly, is we need to figure out how to do this in a way that's sustainable and not just using gap closes, which we will use for sure, but how do we make this more sustainable? I found it interesting. We did not get a single Libre question. So you guys are very concerned on tariffs and macro, but all good there. We've had a good start to the year, and I anticipate that that momentum is going to continue. Gross margin and the operating margin expansion is very important, and I think it's even more important now with the dynamics that we're in. But we're not doing that at the expense of the pipeline. The pipeline continues to provide great new growth opportunities. And, like I said, I think the diversified model here, I think that Josh's question, I think it serves us very well. There's a lot of moving pieces. Maybe it's to Robbie's point, but our job here is to make all that complexity and all those moving pieces into sustained and reliable growth and performance. Which is what we've been doing and what we're going to continue to do. So which is why we've reaffirmed our guidance here, and so we look forward to updating you guys as we go through the year. So with that, I'll wrap up, and thank you for joining us.

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

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