Abbott Laboratories Stock

Good morning and thank you for standing by. Welcome to Abbott's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] 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 expressed written permission.

I would now like to introduce Mr. Mike Comilla, Vice President, Investor Relations.

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Phil Boudreau, Executive Vice President, 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. 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, 2025.

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 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's results in accordance with GAAP. Unless otherwise noted, our commentary on sales growth refers to comparable sales growth. Our definition of comparable sales growth can be found on Page 2 of our press release issued earlier today. and a reconciliation table containing the data needed to calculate comparable sales growth can be found on Pages 16 and 17.

With that, I will now turn the call over to Robert.

Thanks, Mike. Today marks an important milestone in Abbott's history, along with reporting our third quarter results, we announced our intention to separate our Nutrition business into an independent publicly traded company. This decision follows a comprehensive strategic review and reflects our strong belief that both Abbott and the Nutrition business can create greater value and achieve their maximum potential as independent organizations. Abbott entered the Nutrition business more than 60 years ago. Since that time, we built a strong foundation anchored by a talented global organization, iconic brands, and established market leadership positions across the pediatric and adult nutrition categories.

The nutrition market has evolved over time with the pace of change accelerating significantly in recent years. What was once predominantly viewed as a health care market, almost excludably shaped by health care professionals, has increasingly become in market shape by changing consumer preferences, wellness trends and retail execution. While this market evolution is not inherently positive or negative, it has fundamentally changed the environment in which we operate. So to best position our Nutrition business for maximum long-term success, we must evolve and adapt accordingly. At the same time, Abbott has strategically repositioned its portfolio over the past decade into attractive, high-growth markets that require sustained investment to drive innovation and support long-term growth.

So we believe both businesses will be better positioned for the future as independent organizations, each with a distinct identity reflecting their different customer bases, growth profiles, investment requirements and innovation cycles. In this separation will enable both companies to sharpen strategic and operational focus, direct resources more effectively and enhanced commercial and R&D effectiveness. As an independent company, Nutrition will be uniquely positioned to capitalize on the growing demand for healthy nutrition as consumers increasingly recognize the importance of metabolic health and the role of healthy nutrition plays in disease prevention and overall illness. The new nutrition company will be created from a position of strength. The team has done an exceptional job building a balanced growth model, supported by sustainable mix of volume and price.

The portfolio includes several iconic brands, including Similac, PediaSure, Ensure, Glucerna and PDL, which have market-leading positions across the pediatric and adult nutrition categories. With approximately $8.5 billion in annual sales, 16,000 employees and 14 manufacturing sites, this will be the largest globally scaled pure-play company in the healthy nutrition market. Given its scale and financial profile, we would expect this new company to qualify for inclusion in the S&P 500. I'm pleased to share that Daniel Salvador, Executive Vice President and Group President of Established Pharmaceuticals and Nutrition Products will become Chief Executive Officer of the new nutrition company. Daniel joined Abbott in 2014 as Senior Vice President in our Established Pharmaceuticals business for Latin America and also served as Executive Vice President of Nutrition Products for 4 years before being appointed to its current position in 2021. Throughout his career at Abbott, Daniel has demonstrated outstanding strategic insight and operational excellence. His broad international experience and proven track record of delivering results as a business operator, make him exceptionally well suited for this role, and I'm confident he will be a tremendous success. Daniel will be joined by an experienced leadership team with deep industry experience. And this is a battle-tested team that has demonstrated exceptional resilience and dedication while navigating a dynamic and evolving operating environment.

Following the separation, Abbott will remain one of the largest, most diversified and fastest-growing health care companies in the world. The Abbott portfolio will consist of even stronger mix of higher-growth, higher-margin businesses powered by technology and innovation. As a result, we expect Abbott sales growth to accelerate and margin profiles to expand. While the Abbott portfolio will evolve, maintaining balance across products, payers and geographies will remain a key strength and source of resilience for the company. We built this portfolio to hold market-leading positions in 3 of the most attractive areas of health care, med tech, Diagnostics and Established Pharmaceuticals.

The portfolio was also intentionally built to align with durable health care trends. including an aging population, increasing prevalence of chronic disease and the growing demand for earlier diagnosis and more personalized treatment. With market-leading positions, an industry-leading pipeline and a proven ability to consistently generate strong earnings growth and cash flow, Abbott is exceptionally well positioned to deliver sustainable growth and create long-term shareholder value in the years ahead. Cannot be more excited about this future. I have tremendous confidence in Abbott's future as an innovation-driven health care company, and I'm also confident in the opportunities that lie ahead for the new nutrition company. Most importantly, this creates 2 strong organizations that will both continue to fulfill our mission of helping people live better lives. We look forward to sharing updates on our progress as we move through the separation process.

I'll now review the third quarter results before I turn the call over to Phil. Sales grew 7% in the third quarter, and earnings per share grew 9%, representing an acceleration in growth on both top and bottom lines compared to our results in the first half of the year. Turning to Diagnostics where sales grew 6.5% driven by performance in our core laboratory and cancer diagnostic businesses Core Lab sales grew 5.5%, driven by strong performance in the U.S., Europe, Japan and Latin America. On our earnings call in July, I highlighted that test volume data sourced directly from thousands of instruments located across the U.S. and around the world, showed a pattern of strong and stable demand. We view this as a positive indicator of the underlying demand for health care more broadly.

During the third quarter, our testing data continued to support that view with testing demand remaining healthy and at durable levels. In cancer diagnostics, sales growth of 14% was driven by Cologuard and contributions to growth from our Precision Oncology and international businesses. In September, we launched our first blood-based colorectal cancer screening test as the only company to offer both stool-based and blood-based screening options. We are expanding the options available to health care providers and patients to help achieve the goal of getting more people screened.

Turning to Nutrition. Sales grew 5%, reflecting broad-based growth across all 4 categories: U.S. pediatric, international, pediatric, U.S. adult and international adult. As I mentioned earlier, the team has done an exceptional job executing a more balanced growth strategy, achieving a more sustainable mix of volume and price-driven growth. In Pediatric Nutrition, sales grew 9%, led by growth of 11% in the U.S. As I noted last quarter, the strong performance in the U.S. includes the benefit from WIC contract wins secured earlier this year, which helped Abbott regain its market leadership position in both the WIC and non-WIC segments.

In Adult Nutrition, sales increased 2%, driven by growth of 3.5% in the U.S. as retail consumption data continues to trend in a positive direction. We also continue to lead strong growth on a sequential basis with worldwide nutrition sales increasing more than $100 million compared to the second quarter. And finally, we continue to make good progress advancing our innovation pipeline. During the quarter, we launched a new version of our Similac infant formula made with whole milk. This new product is the first and only commercially sterile ready-to-feed liquid infant formula made with whole milk available in the United States.

Turning to EPD, where sales increased 8.5% in the quarter. Our broad portfolio of prescription and over-the-counter medicines tailored to address local health care needs continues to drive strong growth across emerging markets. Growth in the quarter was broad-based across geographies and therapeutic areas, and this included double-digit growth in several countries across Asia, Latin America and the Middle East, highlighting the strong and durable demand that has long been a hallmark of this business.

And I'll wrap up with Medical Devices, where sales grew 8%. Growth was well balanced across the portfolio, led by double-digit growth in Electrophysiology and Rhythm Management. In Electrophysiology, our third quarter results reflect the early beginning of our growth acceleration phase. Growth in the quarter was mid-teens or high teens when excluding LAA. In the U.S., growth was in the high teens and exceeded 20%, excluding LAA, this performance was driven by increasing adoption of our new Volt PFA catheter with momentum accelerating in September following the transition to a full U.S. market release in mid-August. International growth also accelerated as we continue to capture market share in Europe, driven by increasing uptake of our new PFA catheters and growth in other categories across our broad portfolio.

In September, we received FDA approval earlier than expected for our TactiFlex Duo catheter. The catheter enables physicians to seamlessly switch between using RF and PFA energy during a procedure. Given physicians' familiarity with the TactiFlex platform, we expect to execute a broad U.S. launch starting in the fourth quarter. In the third quarter, we also received CE Mark for our new Amulet 360 left atrial appendage device designed to help reduce the risk of stroke in patients with AFib. We look forward to bringing this new technology to the U.S.

In Rhythm Management, sales grew 10%, driven by increased adoption of AVEIR across both single- and dual-chamber segments of the pacemaker market. This expanding use of AVEIR is occurring in both the U.S. and international markets. And in Diabetes Care, continuous glucose moderating sales grew 8% in the quarter. In August, we received FDA approval for Libre Duo, the world's first dual glucose ketone biowearable sensor. This marks the first time that people with diabetes will be able to monitor ketones without the need for traditional blood or urine tests. We expect to launch this new sensor in the U.S. in December.

So I'm sorry, we delivered an acceleration in growth on both top and bottom lines. Innovation continues to be a key differentiator for Abbott, highlighted by multiple new product approvals and launches that further strengthen our ability to deliver sustainable growth in the years ahead. and we took an important strategic step towards shaping our future through the planned creation of a new market-leading nutrition company.

I'll now turn over the call to Phil.

Thanks, Robert. Let me begin my remarks with an overview of some of the key aspects of our planning process for the separation. The new nutrition company will become a publicly traded company through a planned test free distribution to Abbott's shareholders. Upon completion of the separation, Abbott shareholders will own shares of both Abbott and the new nutrition company, enabling our shareholders to participate in the value creation opportunities of both businesses. The final share distribution ratio will be communicated prior to the separation, which we anticipate completing by the end of next year, subject to the required approvals.

We expect to incur separation-related costs as we progress through the separation process. These costs will be treated as specified items and excluded from adjusted earnings. As a result, do not expect the separation to have an impact on we plan to provide in January. As we prepare for the separation, we intend to establish capital structures that ensure both companies have a strong financial foundation. This includes ensuring adequate capital to support long-term growth objectives and capital allocation priorities while maintaining strong investment-grade credit ratings for both companies.

As part of that process, we are planning for the new company to raise debt with a portion of the proceeds to be distributed to Abbott, the amount of debt to be raised and the amount to be distributed to Abbott will be determined at a later date. Finally, we expect that both Abbott and the new nutrition company will pay a dividend that, when combined, will equal Abbott's dividend at the time of the separation. Following the separation, we expect Abbott's financial profile to reflect an acceleration in the sales growth and increased profitability. Excluding the current profile of the nutrition business from the current profile of the Abbott portfolio, we would expect sales growth to accelerate by 50 to 100 basis points, gross margin as a percent of sales to increase by more than 200 basis points and an operating margin as a percent of sales to increase by approximately 100 basis points.

Now turning to our third quarter results. Sales increased 7% on a comparable basis and adjusted earnings per share of $1.42 was in line with our guidance and the consents assessment. Foreign exchange had an unfavorable year-over-year impact of 0.4% on third quarter sales, which was a slight improvement compared to our expectations at the time of our earnings call in July. Regarding other aspects of the P&L, the adjusted gross margin profile was 57.2% of sales, representing an increase of 140 basis points compared to the prior year. The improvement in gross margin was broad-based, reflecting favorable business mix within the legacy Abbott portfolio and from the addition of Exact Sciences as well as the continued operational improvements and disciplined execution of our margin expansion initiatives.

Adjusted R&D was 6.9% of sales and adjusted SG&A was 26.9% of sales. Our operating margin of 23.4% expanded by 40 basis points compared to the prior year. And based on current rates, we expect exchange to have a negative impact of approximately 1% on fourth quarter sales. For the fourth quarter, we forecast adjusted earnings per share of $1.62 to $1.67.

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

[Operator Instructions] And our first question will come from Robert Marcus from JPMorgan.

Great. I'm sure others will ask on the business and the guide. But Robert, given the news this morning on Nutrition, I want to start with that to make sure we address it. Maybe you could run through the strategic rationale. Why now? Why spin versus sell? And any other important points you want to highlight for us?

Sure, Robbie. I actually think that's the right call to start off. The right question to start off with to be quite honest, it's a pretty big announcement for us. And we've gone through a lot of work to be able -- to able to make this announcement today. I've seen a lot of notes be written about kind of the portfolio and all of those notes are from some of the parts and kind of growth rates and impact the growth rates and margin profiles. And I think Phil mentioned some of those. And those are all, I would say, good outputs of a decision like this. But I think it really starts with a very simple, as I laid it out, which is there's a huge opportunity that I think is building in this market in this segment. And we're seeing a shift towards a much more healthy nutrition behavior from consumers not just in this country but around the world. .

You're seeing a lot of traditional food companies try to reposition their portfolios, moving away from ultra process to try and look at their portfolios and ultimately try and build portfolios that try to mimic actually the portfolio that we actually have today. So I just think that strategically over the next decade, this is -- there's going to be a lot of segments in this nutrition business that we built that are going to be very differentiated and kind of high growth. And if you look at Nutrition's portfolio, it's positioned today, the capabilities that it has, it is destined to be a market leader and a market share of that entire segment that's going to have this accelerating growth here. But they are going to need to adapt, as I said in my comment, they are not going to need to evolve.

And ultimately, they are going to need to invest in kind of sales and marketing even maybe look at tuck-in M&A from their perspective to accelerate their growth rates and all of that. And I just -- we just came to the conclusion that this was too exciting of an opportunity, and we just believe that all the things that they would need to do, they'd probably be able to do it faster and more efficiently and effectively as an independent company. So it really just comes down to that. Yes, there's the -- I would say, the -- the ancillary effects of those decisions, Robbie, I think you've written good -- done a good analysis on that in terms of what that does for our growth rates and all that. But I think it really comes down to really the driver of the decision is this is going to be an exciting space. And as a result, we think that the nutrition business is going to be able to capitalize better on that by being an independent company.

From a financial asset perspective, I think this is going to be a very -- as we look at the spin, I think this is going to be a very, very unique asset. If you benchmark it versus its category peers, and not necessarily versus kind of the med tech peers that they're currently part of right now. It will have a very -- it will be a very differentiated asset whether you think about growth mix, the scientific capabilities have, its growth prospects. It's going to be, as I said, the only scaled truly global scale pure-play in this kind of healthy -- in this kind of healthy nutrition. So I think this is going to be a very, very distinct asset.

To your question on why now, listen, we've got a history of shaping the company. I think that's one of the hallmarks of Abbott, and that's, I think, why we're still relevant today after 138 years is that we will we will look at shaping the portfolio to align to where we see the market trending and where we see clinical needs and problems to be solved occurring. But as you do that, you also need to be thinking about sequencing. And I think sequencing is a key element as you think about shaping the portfolio. And they are very different elements of shaping. But for me, from an operational standpoint, I just think you need to be mindful of kind of organizational bandwidth and ability for the organization here to absorb the moves. So we have an order of events in mind of how we're thinking about things. I think we identified, for example, if you go back a couple of years, like we identified Precision Diagnostics as the next area that we wanted to be a part of. So we announced our acquisition of Exact Sciences last year. The integration is going great. Actually, I think we've done a lot of heavy lifting in these for 6 months have got a lot done. I'm sure we'll talk about that, too.

So I just think that now is the right time to start that process of creating a new company. It's coming from a position of strength, as I said in my comment, I think I read a story that just came out -- headline that just came out on Barron's who got it totally wrong. I'm just going to say, I mean, it's coming out of a position of strength. And we've got a very sustainable growth model. If you look at the volume growth that Nutrition had this quarter, and what we're projecting to have in the next few quarters, it is significantly higher than what its peer set is given the portfolio that we've built and the segments that we're in. So the business has returned to growth. The pipeline is very healthy. We're bringing innovations to the market. There's going to be a lot of interesting innovation over the next kind of 12 months here. We have strong brands, experienced and very capable team, as I said in my comment, I specifically dosed the term battle tested because that's kind of what it felt like over the last 4 or 5 years. And if I had to pick a team to go into battle with in this nutrition space, I'd pick that team. I think they've navigated very well everything that they've done and all the environment that they've operated in. So I think this is just a unique opportunity for us and for the Nutrition business.

And you had a question on spin versus sell. Yes, I mean, we just thought that this was after we went through the analysis, not to make a decision that it's probably going to operate better as an independent company, what the right mechanism there to be able to position it to be a leading company and ultimately, to drive shareholder value. And we just concluded that the spin-off here was absolutely the right approach. A sale of a business like this, as I said, we've been in this business since 1960. So if you think about the sale, the sale is going to come with an obvious tax implication there. And then a time line that is not necessarily within entirely within our control here. So I think these 2 factors might be a little bit prohibitive here for anybody that's got any interest. So we have no interest in selling the business. I have no intention to selling, not even looking at selling it and just think spin-off is the is the better value creation for shareholders year. We've done a couple -- obviously, we've done a couple of spin-offs in our history. Those have gone very well.

Obviously, different circumstances, different times, different management teams. And -- but I think one of the things that is clear to us in these processes is I think one of the big indicative indications here of a successful spin. I think a lot is attributed, I think, to a very highly group of Abbott people that become founders, so to say, of the new company, and they instill a lot of kind of the Abbott kind of culture and the Abbott way of doing things. into that business. And I think that helps set a strong foundation here. So like I said, I think this is a unique opportunity, growing demand for healthy nutrition. This will be a very differentiated asset here, and that's why I thought the spin was the better move here. So -- and obviously, we're going to be working over the next kind of 12 months here to be able to get ready for that.

And as we do with these, I think Robbie is -- we're obviously going to prepare to set up the nutrition company for success. But it's also an opportunity for us to relook also at existing Abbott and looking at our cost profiles and things like that, it's going to be a great opportunity for us to relook at everything from that perspective. So I think I'm excited about this. I think this is -- was a good process. I think we came to the right long-term strategic decision here. And now it's all about execution.

Our next question will come from Larry Biegelsen from Wells Fargo.

Robert, congrats on the Nutrition spin. Just confirm, please, that the net liability will remain with Abbott that seems logical from what we've seen from other spins. And secondly, can you please talk about the drivers of the revenue guidance reduction this year? It looks like it implies about 8% growth in Q4? And what are the implications for 2027?

Sure. I figured this question would come up, Larry, I thought it will come up a little bit down in the list here. But -- well, I mean, like you said, as it pertains to the announcement that we just made, how to deal with litigation matters is -- it's a common topic. When it comes to business separations, we're not the first company that's had to deal with this, like you said. I don't think -- actually, it's pretty clear that we don't need to fully resolve the litigation matters. It's not a prerequisite for completing the separation. I'd say both Abbott and the new company are going to be well capitalized well capitalized to pursue their respective growth opportunities, we'll capitalize to execute the respective capital allocation priorities that they might have and also well capitalized to continue to defend the legal positions here.

So I'll provide more details of that as we progress in terms of exactly where the liability will sit. But for me, both companies are going to be super well capitalized to be able to deal with that. At the same time, I think we continue to focus on achieving what would -- what we want to be a logical and sensible kind of resolution. You saw we took a meaningful step back in August when we settled 2,000 claimants. But that settlement in no way reflects any change to the position that I've measured about these products, which is continue to stand behind their efficacy and safety. They remain essential components to neonatal care. They are a standard of care. I think if these products weren't available, I think you would see a little bit of a public health crisis there. And I think that view is supported by regulators in [indiscernible] societies, including the FDA, NIH, CDC and the American Academy of Pediatrics.

So I think the litigation environment now is shifting a little bit, I would say, a little bit to our favor. We prevailed a lot in federal MDL cases, and there's going to be important decisions in both federal and state courts that have helped increase our position. So we'll provide updates as we go through the process in terms of a little bit more specificity in detail. All I can say is not a prerequisite to resolve it before the separation and both companies will be well capitalized to be able to deal with this. So -- and then sorry, what was your -- what was your second question, Larry?

Yes. Sorry, the revenue guidance reduction, I think, to 6% this year implies about 8% for Q4. What was the driver or driver of the revenue reduction and implications for next year?

Sure. Sure. Yes. Listen, our Q3 growth was in line with the expectation of 7%. We had the normal puts and takes, Larry, that you have when it comes to managing a lot of portfolio like us. We had 2 businesses that be expectations, one business that met expectations and then one business that missed expectations. So the reduction in to, for the full year, around 6%. Like you said, implies just north of 8%, which is at least accelerating versus where we were in Q3. It's really driven by 2 businesses here. And I would characterize these as they're not kind of permanent changes to the growth rate. It's just adjusting based on kind of what we're seeing right now, which is EP and diabetes.

So let me pack that a little bit for you. In EP, we're facing some short-term headwinds from dynamics related to the LAA market. It's become an increasingly headwind to our EP growth, not only due to the market challenges that I think a competitor has discussed pretty ample. But I'd say for us, so we saw that maybe with a quarter or 2 delayed versus where they were seeing it. And maybe that's just because of our size and market share position. But what was interesting is as soon as we got CE Mark for the new LAA device, there was almost like an immediate slowdown in orders here in the U.S., as I think accounts are waiting for the new products. So that's probably a little bit different for us is an -- so when I got that, I was like really -- and they were able to show me clearly kind of trends that we were seeing even with the slowdown and the impact of that CE mark.

So I expect that dynamic to be there in Q4. And I think that's going to be the last quarter where we're going to see this dynamic of accelerating kind of ablation business being offset a little bit by this headwind here. I think as we bring in 360 to the market, I think we'll start to kind of reignite that growth and capture share. at least that's my goal. But listen, despite the headwind, as I said in the prepared comments, I think the quarter we actually with a lot of great momentum continue to capture share in Europe. Europe growth was up 25%. And you have both combination both platforms there Volt and TactiFlex Duo. We're going to launch Volt in Japan sometime in Q4. That's going to turn Japan from a headwind to a tailwind for us. Japan kind of followed very much a U.S. type model where a very rapid adoption of PFA. So we're excited about coming to the market in the fourth quarter in Japan.

And I think both transitioned from limited market release to full market release in the U.S. in mid-August. So Q4, you'll have this kind of full quarter of the impact over there. And the product is doing very well and I think that I think people might have not have understood kind of the dynamics of what a limited market release is and then how you transition to [indiscernible] markets. And I explained why we do that. for all of our products. So TactiFlex Duo got approval in September. That came a little bit earlier than I expected. And as I said in the comments, this is one where the TactiFlex chassis like I will say, is widely used already. So we'll probably do a very short limited market release here very short and then go to full launch already in Q4. So I think that's going to provide a lot of momentum here. So we've got a lot of catalysts lined up for our business.

So I think the impact of that is about 5 points of growth versus where we were previously around 25%. I think we'll be around 20% in Q4. But I still believe even with the number we're going to be taking market share. So that's one of the drivers. The other driver is diabetes. I think in the July call, Larry, I talked about that the CGM market had not seen -- had not seen a significant new reimbursement expansion for quite some time. That led us to revise our diabetes growth outlook to high single. If I look into Q4 right now and probably for the next few quarters, and I now expect that growth rate to be in kind of that low to mid-single range. And that really is -- that change will reflect, I think, 2 things. One of them is a little bit of a harder challenge in penetrating the type 2 population in absence of the reimbursement expansion. So that's probably one kind of key driver. And I guess that's going to be when we see the reimbursement expansion occurred at CMS. And like I said, I think we'll see a very strong kind of reimbursement growth. So that's one element there, Larry.

I think the other element that we're seeing is a little bit more pricing pressure in the international markets. And as you might know, we have significant market share in the international markets. If you look at all the major countries, we'll range between 50% to 70% market share. And we've all expected there to be some pricing pressure, especially with the growth of the category and the excitement. And we've been -- internationally, I think you see a lot more competition. And we've been very good. I think the team has done an excellent job through marketing, through clinical, through all the superior of the product over the last couple of years to be able to defend that. So I expect it to be a little bit more price pressure internationally a little bit earlier. So I think the team did a really good job there. But I think our pricing actions here that we're going to have to take internationally are going to are going to kind of mute a little bit of the volume growth that we're seeing. And this -- I think it will be a strategic mistake for us to lose market share based on price in these international markets.

And we're not having to match the pricing, Larry, but I think we're having to adjust a little bit here as we go through this. And I think that's what I'm forecasting here over the next kind of few quarters is we'll make some pricing adjustments as we do those, we're going to secure longer-term contracts and then also have language there regarding kind of expansions of patient populations also. So I think you have this dynamic here for a couple of quarters in our diabetes business. so that we can make sure that we can defend our market share position. And then I think -- I think what you'll see then is kind of similar to the kind of decisions we made in other parts of the portfolio where you have a little bit of an impact for a couple of quarters and then you kind of reignite. I don't think this is at all any issue with the market. I've been pretty adamant about the ability still for there to be lots of market penetration.

But I mean we're not going to have our heads in the sand here and just think that you've got this great market and not expect there to be some price competition. The good thing for us, though, I would say is because of the scale that we built and because we've been planning for this and being ready for this, we're going to be able to offset kind of the margin impact of that through our COGS programs and the things that we've been doing in our manufacturing setup. So I think that's really the driver. But I would say if you look at -- we've got plenty of growth opportunities also, Larry. So when I kind of set that target at kind of low to mid. If I look at what we've got ahead of us, Libre Duo is going to launch. We really haven't launched that product yet. And I think that's going to be a nice growth driver for us next year.

We're going to have a benefit here in the U.S. from a pretty significant payer formulary coverage that flipped in our favor, and that's going to go into effect January 1. So there's a lot of growth opportunities that we've got in our diabetes business. Would I be surprised that we would do much better than that next year. It would not surprise me at all that we would do better. But at this point, I'd say we got to make sure we get the pricing aspect right. And then we'll -- as we go through the year, we'll be factoring in some of these growth drivers and the implications that they have. So if you think about 2027, then I think as you're looking at, okay, how does that translate into 2027. I expect to see acceleration in our total company growth rate. And there's a lot of reasons why we would expect that. But I would say we're probably going to take a little bit more of a conservative approach here in terms of how we've guided historically, at least on the top line.

We've maintained, I'd say, a pretty impressive track record for delivering on our EPS targets. I think if you go back for the last 6 years, we've met or beat our EPS targets every single quarter. And if you look at the annual growth rate of those -- of what we've been doing for EPS, it's been around 9% EPS growth. So I think we've been really good and strong over there. As it relates to our top line I think we've been very good, but I'd say the track record here in the last couple of quarters or especially during this year has been a little bit more inconsistent, let's call it like that, and we've fallen short from some of the expectations. So I think for 2027, I think we'll set our guidance that's going to create opportunity for us to move up from there in January. I'm not going to give an official guidance here before our January's call. But high level, I'd say forecasting sales to be as we come out of the gate pretty similar to this year. And I think that's just probably feels like the right place to start.

And Larry, I say that, while I acknowledge that we have a lot of new product launches this year, there's a lot of carryover from the products we launched this year into next year. There's a lot of new products we're launching in 2027. I get that there's probably some comp also, especially in the first half. So I get all that. And all of that would obviously say, hey, you probably can accelerate your 2027 growth versus in 2026. I strongly feel that, that's going to be the case. But I said to start off, I think we'll take a little bit more of a different approach than what we've done in the past, and then we'll be able to go up and move up from there. That being said, we're still going to have great opportunity for gross margin and gross margin expansion. We're still going to have earnings growth. We're still going to be investing in our in our near and long-term product pipelines. We're still going to be able to generate real strong cash flows. We'll grow our dividend. All the stuff that you would expect from Abbott, we're going to be doing all of that. But I think that's probably a prudent way to start the year and that's going to give us the opportunity to kind of move up through the -- as the year progresses.

Our next question will come from Patrick Wood from UBS.

I'd love to start on the pipeline and really just dig into that because obviously, you've got conduction system pacing midterm and the 360, probably $200 billion of biologic drugs going through LOE. There's obviously a lot of midterm that's going on. And so I guess my question is in 2 parts. A, how do you feel about the forward pipeline today compared to the forward pipeline in the past? How would you rate it? And b, as you're thinking about it, not asking you to pick your favorite children, but what do you feel like either gets missed by the market or less attention, but something that's really on your radar and very personally a big sort of focus area for you.

Sure. I mean I love all of our innovations because I don't think you're going to get me to go there. But I would say, listen, I think the market recognizes the pipeline that Abbott's built. I don't think that there is a misunderstanding of what we're assembling over here. So we can talk about those. But I don't think there's like some misunderstanding. I think it's clearly visible to investors that we've got multiple shots we're developing across all of our businesses Yes. And some of them will do better than others, but I think all of them will have great contributions to our growth rate. And yes, what we need is 1 or 2 to kind of completely blow it out, and it kind of changes the entire trajectory. But we're building a pipeline of products organically here that anticipating what our customers need, and we're making those investments.

If you look at the R&D spend, for at pre-COVID, I mean we were averaging around $1.7 billion, $1.8 billion. We're crossing $3 billion this year, and we'll be increasing that into next year, which was kind of to my comment in 2027. We're going to continue to make our investments. We're going to continue to expand margins, and we can do all that. because of how the portfolio is positioned into these very high growth, high-margin and quite frankly, a lot of clinical problems to solve. So I think you mentioned a couple of them there. I've talked about some of them. I'm excited about the -- you mentioned at the get-go the AVEIR CSP that's going into trial right now, the conduction system piecing lead this product. I'm excited about that because our goal is to completely change how pacemakers have been used in the past. And I think our leadless technology shows that it is possible, and we're looking about really building a kind of sustained growth rate here.

Many people didn't think that CRM was a growth business. We're showing that with good innovation, good insights, good relationships with KOLs, we can drive that. I'm excited about the mitral replacement valve. I've spent some time close to that program, probably a little bit more closer than others and had opportunity to interact with the KOLs. And I know because I've seen how these things play out. I can read people in terms of how they talk about innovations. And you can tell sometimes when innovation is good and compete well. And you can tell when a KOL tells you that this is really going to be a game changer, and it's going to change kind of the standard. And I think our Cephea program is going to do that. We've got a balloon expandable TAVR valve going in. We've got IVL programs on the med tech. We've gotten neuromodulation kind of instance that we're making also.

We're making investments in our Libre platform not just on a new diabetes sensor, but also looking at how to use the platform that we've built the manufacturing and the technology platform to expand into other analytes and we're going to go into a trial with a lactate sensor. But I can tell you there's at least 5 or 6 that the team is really excited that we're funding that we're funding on, that we're working on. Well, all of them hit? Probably not. But if we're 3 hit, it will be incredible, I think, to be able to kind of leverage that. So I think you mentioned the biosimilars in our EPD business. I mean, yes, there's a significant amount of LOE that's happening in the biologics space. And a lot of these products aren't available in these emerging markets by decisions from the originator. So this is going to be a huge opportunity for us to leverage the regulatory, the government the physician, the distribution relations that we have to bring these products on. And you've got this business that's been growing at least for the last 5 years, between 7.5% and 8% pretty consistently every single quarter.

I think that, that is going to be very exciting also. So -- and then on top of that, we're going to get into a bunch of new tests new personalized diagnostic test with our cancer diagnostic business we're going to be reporting data on our MRD test at ESMO. I'm extremely excited about that test. And I think this is going to provide us an opportunity also to start to be a player or at least to compete effectively in that segment of the market. So I'm sure I'm missing a bunch out already, too, but I'd say there's a deliberate effort on behalf of the entire management team here to make sure that as we as we find sometimes challenges, and we have to look at our operational expenses that R&D is really ever an area that we're going to touch because we feel that our productivity in that, even with a 7% profile, we're getting a lot of productivity out of the pipeline.

So I think that, that is ultimately the lifeline that is going to be the growth driver for us. I'm sure that somebody in my team has got a map. I'm sure that my team has a map that lists out all the products between '28, '29, '30, '31, and those are all projects that we're constantly looking at looking at ways to accelerate them, looking at ways to make them better. So we feel very good about our pipeline. At the same time, we don't suffer from the syndrome of not invented here. We never have. Do I prefer to have more of my organic -- innovation being organic, I do. But we've got plenty of capacity also to be able to kind of add to the portfolio. And if we see opportunities to do that, we'll do that. I've talked about probably going forward, at least for the foreseeable future here in the short term, there will probably be more tuck-in deals. But we do all that. We can have organic innovation, and we can also look externally.

And I think external partners look at Abbott as like, okay, this is a company that can actually make these innovations really impactful and global in the market. So I think we have a good position there, too. So pipeline is super healthy. And if my R&D team is listening to this, they'll probably say, yes, we could probably use more. They probably have a bunch of projects under the line, and that's good, too. But I think we're investing in all the right areas to be able to sustain our growth.

Our next question will come from Matt Taylor from Jefferies.

I was hoping we could spend a minute or 2 on diagnostics and focused on cancer diagnostics and the dense there. Looks like you did a little bit better this quarter, but I know you're hoping for a step up into the mid-teens. Could you just touch on the dynamics with Cologuard, the rest of the business? And maybe give us some thoughts on Freenome?

Sure. Yes. So we were -- we grew 14%. I think consensus was just north of that, like 15%, 15.5%. So it came a little bit short. Was I expecting to do higher than both those numbers? You bet I was. I'd say the biggest driver of that delta versus expectation there was the cybersecurity event that we had in July. That caused us to lose a little bit of momentum. I think you see a lot of companies, including a few of our health care peers have had to deal with that. Some of them with, I'd say, worse outcomes than what we went through. I think the team did a really good job. I mean if you think about an integration process, dealing with the cyber attack is not on the menu. And I think that the guys did an incredible job to be able to mitigate that. When they did bring me the forecast and they talked about, well, the cyber had an impact. I -- as you would expect, I had to double click on that.

And we saw a couple of accounts, Matt, because of the connectivity in the system, the way we're connected to the system. You saw a couple of systems shut the connectivity down so we could bring them evidence that, hey, everything was up to speed. So then when you do that, then you're reverting back to faxes and e-mails and stuff like that, that -- so there were notable kind of drops. But then as soon as the systems return right back on, you saw that they pop right back up. So that -- those blips, which lasts at about 7 to 10 days, that causes about 1 point of growth. So yes, I expect it to do better than what we deliver. But still -- and I know the team did also, but I think they did a really good job managing that. But I think that the growth is great. I think we're seeing -- I'm really pleased with the integration and kind of how things are going.

Cologuard grew mid-teens and continues to accelerate. We're seeing growth in new users, which is really important to be able to show that growth in new users. Obviously, the rescreen business is doing very well. The international growth rate is happening. The care gap program is growing also. It's definitely a growth segment for us. It's just probably a little bit harder to forecast. And I'm learning a little bit more about the difficulties in that forecasting right now. We obviously build a plan as to when we're going to send these orders out. Obviously, the insurance companies and the health systems will determine when they want that out and sometimes they're managing their expenses, but it's very clear to me that the need for these brands in place so that it fits into their star ratings and into all of their Medicare CMS rebate is super important, and they value this hugely. It's really a question of timing. But we had good growth in our care gap programs, too.

So I'd say from a top line perspective, I feel very good about where this business is going, and it's doing everything that we expected it to do. I'm excited about the pipeline also. You mentioned the CRC blood test. I mean, we just -- it literally was Matt, I think it was like September 30, they started kind of sending out the e-mails and starting to promote and all of that. So really didn't have much impact in Q3. Do I think it's going to have a contribution to our growth rate, Yes, it will. Obviously, the ASP to that product is higher than the ASP that we have for Cologuard. So that's going to be a growth driver for us also. It's always got a different margin profile as we're working with a partner, but we've factored all that in, not only in our deal mobile as we're going forward.

I think it's going to play an important role. Do I think it's the preferred past? No, we don't. And nor does the medical societies, the Cancer Society and a lot of the standard of care recommendations to go with stool first for a lot of reasons, but predominantly because your -- you've got a better performance in earlier detection. And ultimately, that's what screening is all about. You're trying to detect early. So -- but it does play a role in the portfolio. And I think that gives us the opportunity, as I said in my on my comments, we're really positioning ourselves here as the only company that has the broadest portfolio with both blood-based and school-based testing. And I think that puts us in an advantage as we talk to all the different value players, all the different stakeholders in the value chain, I think that puts us in the position of, okay, we've got all the different technologies here to be able to do that.

So I feel good about the test. I think it's going to be an important test to have in the back, especially for those that aren't doing anything. So maybe this could be used as a way to get them to start to think about it since it's pretty convenient. But I'm -- we just got to be careful about how these things are promoted and how the accuracy of the information that's being portrayed to the consumer is complete and transparent and some of the deficiencies that the blood still has. I mean I think it's going to get better. It's got to get better. It will get better. It's just right now, the detection on the precancerous lesion side is not as good as what Cologuard is. So -- and then as I said also, I think the MRD test that we're going to be presenting at ESMO, I think that's going to be a great opportunity. So pipeline is doing good. The international business, the opportunity to bring this technology internationally, and we've been doing a lot of great work over there.

We've already selected the markets that we're going to go after. They wouldn't be what you would typically expect those markets to be, but the markets that we feel will have the biggest impact, but I'll tell you what I'm really impressed is kind of the progress we're making from a margin perspective. We're able to do all best, grow the business, invest in the pipeline and really kind of also change the trajectory of the profitability there. So if you look at this business and its operating margin profile before we acquired it, it just turned slightly positive. We're exiting Q3 with an operating margin profile in the high teens already with this business. So I think that's I think that's very positive also that we can drive the top line and also drive the bottom line. As I've always said, for us does matter. Yes, we do care about the top line, but EPS also matters. And I think the teams have been able to do both of those. So overall, I think the business is going well. And we've got a lot of growth opportunities ahead of us, whether it's with existing products, expanding into different areas, segments, countries or bringing new products to the market also.

Our next question will come from Vijay Kumar from Evercore ISI.

I have 2 questions. Maybe I'll ask both of them upfront. One follow-up on this exact did Cologuard 2.0, the next-gen Cologuard did the reimbursement get cut, Robert? And what's the ASP for the splug test rate? It feels like Exact should accelerate? And then my second question was fiscal '27. Thanks for the color on top line. But are you still -- should we still be aiming for double-digit EPS growth?

Yes. Sure. Let's talk about your first question regarding Cologuard Plus and getting a reimbursement -- listen, Cologuard Plus is a new test. So the process for setting CMS reimbursement was a little bit different versus tests that have been on the market for a while. We've been in active discussions with CMS. Conversations have been very productive. I'll just say the following. I find it very hard to imagine that when the process is done, that the reimbursement rate for Cologuard Plus would go down. And I'm just going to that. It is an interesting process, very different, I would say, from kind of NCDs and some of the med tech kind of process. So it is a new -- it's a little bit of a new process for us.

But like I said, I'd be very surprised if that were to happen. I think you asked about the price of our blood test. Yes, I'm not going to divulge that because for obvious competitive reasons. There is a -- there's somewhat of a kind of price that's been set by the market right now. We have an opportunity here to think about broad adoption of the technology. I find it difficult to believe that you'll get kind of the kind of uptake in any kind of blood type test at these rates. Yes, they'll show good growth rates, and you'll penetrate a very small part of the market and you'd be able to show. But I think that for this market to really expand. And now I'm going beyond just kind of simple screen. I'm just talking about it just more holistically. If we're going to want to see this type of testing become kind of standard of care and there's going to be a very large amount of -- at least in this country, forecast is that 40% of adults are going to have some level of cancer.

If you're going to have an impact and using diagnostics as a way to kind of help eradicate and bring down these rates and increase like there needs to be a much broader adoption. And you're not going to be able to get that broader adoption with the kind of pricing strategies that are being applied today. So we're being mindful of that, and we're thinking about that. We're in discussions with payers and we're really looking at how do we compose a full portfolio of cancer diagnostic solutions for those that are paying for it. So that's what I'll say about pricing right now. And then what was your other question?

Double-digit EPS for fiscal '27. Is that still a number?

Yes, I get that you guys are going to start to try and triangulate as much as you can there. Like I said, I'm not going to give kind of total guidance from -- on this call, we're probably going to do that in January. All I'll say is, I mean, I gave you a little bit in terms of how we're thinking about our top line. But like I said, we're going to have EPS growth. We're going to have gross margin expansion. We're going to have all the things you would expect and probably leave the actual specific guidance range for EPS and all other elements, cash flow all of that, we'll leave that to January.

Next question will come from Travis Steed from BoA Securities.

At TCT in a couple of weeks, we've got Amulet 360 pivotal data and coronary IVL pivotal data. Just curious anything you could say on that? And then how quickly those products can launch. It seems like doctors are already waiting on Amulet 360 today. comment on how much share you can take or kind of view on when the [indiscernible] closure market stabilizes?

Yes. So you got 2 important readouts for us at TCT this year. I think we'll have more. But yes, I know those will gain a lot of attention. I mean I'm not going to preface what the data is going to say, we'll wait for the investigators to kind of lay out that information but I think these are -- I think we showed a 45-day data the Boston meeting back in January, Travis, for our LAA device, and I think that's a kind of good benchmark to have there. Regarding the market, yes, I mean, I we started to feel some of these challenges. I'd say maybe 1 or 2 quarters after the market leader. I think that the way to counter that is there's definitely an opportunity here still to educate this opportunity to make continued clinical investments to be able to show the technology.

Obviously, the market leader has been doing that. But so have we. I mean we're going to have a readout of our trial not next year, but probably the year after that on our trial versus NOACs. And I just think you got to keep on investing as clearly a benefit here for the patients and the health systems, they want this. We are investing in a lot of stroke prevention technologies. This is one. It's obviously the one that gets a lot of attention. but we probably have another 2 or 3 products that are in early stage in our venture arms that we're also kind of working on because I think this is just going to be a need, a continued need. So I think the market is going to continue to grow, and that's why we're going to continue to invest in it in terms of our ability to forecast how much share. I'll let you guys -- you'll probably do your checks with physicians and try and triangulate that. I'll let you guys kind of decide what that's going to be. But we think we've got a very competitive product that not only has added some ease of use to its implant, but it also maintains what we believe is a superior seal technology there.

So yes, we feel good about it. And I think on -- I think you had -- on the IVL, yes, I think this is an interesting category. It's a $1 billion-plus market that's growing. We didn't have to spend over $10 billion to get an asset like this. We did it through our acquisition of CSI. Team took over the project, did some modifications really good work by the team and our partner, and we filed for at least for the coronary side, we filed for approval I don't know exactly when, but I know we're expecting it sometime in the first half and maybe we might surprise on the earlier side there. But I think we feel good about it, adding that to the portfolio. I think the vascular team is really looking forward to this. I think you've seen that we've been able to accelerate our growth from kind of a negative flat business to like now consistently delivering mid-single digits. And I think this just adds to the ability to kind of accelerate growth in our vascular business, too. So -- and I think we'll start our peripheral IVL trial at the end of the year. So those 2 products will add to the growth rate in our vascular business.

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

Our last question will come from Joanne Wuensch from Citi.

Congrats on the Nutrition spin. Briefly, can you comment on potential reimbursement from CMS for non-intensive type 2 for CGM use. And a quick follow-up. Does anything in your pending spin of nutrition impact any of your other strategic plans such as future M&A?

Sure. I know this is the -- I don't know what kind of -- what I would characterize, but I know it's a big question, which is when do we expect the type 2 non-insulin user reimbursement, CMS reimburse kick in. I'm just going to be consistent here, Joanne, I'm not going to try and forecast that. What I can say is that the clinical data is significant. It is very real. I know that there are many in those that are making those decisions that believe in the value of data of predictive data of using continuous data to be able to kind of shape behavior I've said this multiple times, CGM the behavior modification tool. They're not doing anything your body. They're not changing any of the biology, anything in there. They're just giving you information. And there's a lot of people that believe that, that information is valuable to change behavior, especially with type 2 non-insulin patients and the clinical data that has been presented has shown that the same way the clinical data with basal patients has shown that, too.

So there is definitely support for it. There's a clinical support. And -- but trying to forecast exactly when that's going to happen. I am not going to do that. I am not going to say that it is embedded in the forecast for next year or -- right now, what I can say is I'm not really factoring it in. But I know that when it does kick in, like we've seen this in the past, acceleration happens. And when that happens, I think that what we're doing is preparing ourselves to be in the best possible position. It is a different channel, right? You're not in the diabetes endo clinics or in primary care. This is a different. It's a different field of play. And we've been investing in that field for quite some time now. So I think we'll be in a good position to be able to capitalize on that, but trying to forecast it. I'm not going to try and do that, Joanne. But I can say that the momentum to be able to do it, the clinical support, all of that is all in place. It's really a question as to when that's going to happen. Sure you maybe have read the comments, the open comment period, there's plenty of support. It's just really an opportunity here as to when that's going to happen. And then what was your second question again?

It had to do with the nutrition span if it impacts any of the changes in M&A, et cetera. it's an M&A question.

That's fine. Listen, the answer to that is a big note. It has no kind of impact. If anything, I'd say once we go through that, I think it even strengthens it even more. Our balance sheet is in very great shape. We've got a lot of flexibility. You know our philosophy here of taking a more balanced approach. I'm not going to give you percentages of how which goes there, how much but we take a balanced approach. We'll grow the dividend next year, right? We've got probably the last tower of debt pay down related to the St. Jude, AVEIR acquisitions will occur this year. And then we have very few kind of debt payments in a couple of years following that. So I think we'll be in position there. We'll have opportunity for buyback. We've got plenty of raw there.

On the M&A side, yes, I mean, I said this last time, we're obviously focusing on the exact integration. I think the team has done an amazing job at the speed at which they've done this is really good. Our net debt to EBITDA is going to be around 2x. So we still have plenty of capacity. But I would say as we look around, it's probably more in the tuck-in range than it is on kind of more transformative, I would say, just because I don't -- not sure I see anything that's exciting out there right now, at least kind of in kind of in that kind of start-up kind of mode. I think there's some really early-stage stuff that we're very excited about. And that we're investing in from a venture perspective, but we've got plenty of opportunity. And if there's going to be. And if there -- if the opportunity aligns with the right moment and sequencing, like I said, we've got capacity to do that.

But I'd say they're probably more tuck-in than anything else. So no, that doesn't affect our ability to continue to grow the dividend, invest in our organic opportunities and do M&A, too. So I think we're in good shape. So I know I've gone over here, and I expect it to go over, so I appreciate everybody kind of hanging in there. I'd say, listen, we had a very good quarter, delivered an acceleration on the top and the bottom line. I think one of the questions that was asked there, as I've said, innovation is the key differentiator at Abbott. And we don't want to be overly reliant on 1 or 2 products. We've got opportunities across all of our businesses, and we've got multiple new product approvals that are going to carry into next year. We're going to have product launches that are going to into that are going to occur in next year and will ramp up in next year.

So I think that, that is probably our biggest driver of sustainability here is our pipeline is very healthy. Teams are doing a great job at navigating what I would say is a pretty volatile environment right now around Globe and teams have done an incredible job there, and I think they're going to continue to do that job as they continue to be motivated and inspired by the work that we're doing. And we took this pretty big important step here towards shaping the future. And I think that's how that's how one needs to look this is we're not making quarterly decisions here, but looking ahead the next 5, 10 years, what's the right portfolio to assemble. And I think opportunity that's going to be ahead of this nutrition company is going to be pretty significant, and I'm excited for them, but I'm also excited for the Abbott portfolio. So thanks for being on the call.

Thank you all for your questions. This now concludes the Abbott's conference call. A webcast replay of this call will be available after 11:00 a.m. Central Time today on our website, abbott.com. Thank you all for joining us.

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

Good morning, and thank you for standing by. Welcome to Abbott's Second Quarter 2026 Earnings Conference Call.

[Operator Instructions]

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 expressed written permission. I would now like to introduce Mr. Mike Camilla, Vice President, Investor Relations.

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Phil Boudreau, Executive Vice President, Finance and Chief Financial Officer. Robert and Phil will provide opening remarks. Following their comments, we'll take your questions. Before we get started, statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2026. 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, 2025.

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 at its 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 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's results in accordance with GAAP.

Unless otherwise noted, our commentary on sales growth refers to comparable sales growth. Our definition of comparable sales growth can be found on Page 2 of our press release issued earlier today and a reconciliation table containing the data needed to calculate comparable sales growth can be found on Pages 16 and 17. With that, I will now turn the call over to Robert.

Okay, Mike. Good morning, everyone, and thank you for joining us. Today, we issued second quarter results that included sales growth of 4.8%, which represents an acceleration compared to the previous 2 quarters and adjusted earnings per share of $1.31, which exceeded the midpoint of our guidance range and the consensus estimate. Considering our second quarter results, and updated outlook for the remainder of the year, we are reaffirming our full year guidance for comparable sales growth of 6.5% to 7.5% and raising our EPS guidance range to $5.45 to $5.60.

Before summarizing our second quarter results, I want to highlight a few recent pipeline achievements, including completing patient enrollment in our tectonic coronary IVL pivotal trial, completing our FDA submission for approval of our new Analyte 360 left atrial appendage device; and obtaining C-MarkLibre Duo, the world's first dual glucose ketone monitoring sensor designed to detect rising ketone levels and help prevent diabetic ketoacidosis.

We anticipate launching these 3 new products, along with our TactiFlex Duo PFA catheter in the U.S. in a steady cadence over the next 12 months. We also remain on track to begin patient enrollment in the fourth quarter for several important clinical trials that will support a steady cadence of future product launches and these include a balloon expandable TAVR valve, a leadless conduction system pacing device, leveraging our AVEIR pacemaker, a mitral replacement developed following acquisition of Cephea Valve Technologies, a peripheral IVL device developed following the acquisition of CSI and a wearable continuous lactate monitoring center design to reduce the risk of sepsis following discharge from Hospital.

I'll now review our second quarter results in more detail before I turn the call over to Phil, and I'll start with Diagnostics. Diagnostic test results inform approximately 70% of all health care decisions, making testing volumes a reliable barometer of overall health care activity and demand. Our test volume data that's sourced directly from our diagnostic instruments located across the United States and around the world continues to reflect strong and stable demand for testing. We view this as a positive indication of the durable underlying demand for health care, not just in the U.S. but globally. This durable demand was evident in our core laboratory results this quarter where our U.S. business grew 7.5% and we continued our track record of strong performance across Latin America.

In Rapid and Molecular Diagnostics, sales declined 8%, driven by the anticipated decrease in respiratory virus testing as a result of a weaker than normal season that concluded during the second quarter. In cancer diagnostics, sales growth of 13% was driven by mid-teens growth of Cologuard, which is benefiting from a growing base of both new and repeat Cologuard users as well as contributions to growth from our Precision Oncology and international business.

We continue to expect cancer diagnostics growth in the second half to be -- second half of the year to be higher than the first half, supported by increasing volumes from care gap programs, recently launched tests and continued international adoption. In May, the American Cancer Society updated its colorectal cancer screening guidelines, reaffirming Cologuard and Cologuard Plus as preferred screening options. This designation reflects Cologuard's market-leading accuracy and superior ability to detect cancer at earlier stages compared to other available tests.

Moving to Nutrition where sales finished slightly ahead of our expectations for the second consecutive quarter. Sales increased sequentially by $125 million, driven by improving performance in both pediatric and adult nutrition. In Pediatric Nutrition, our adult -- in Pediatric Nutrition, our international business was the first of our nutrition businesses to transition back to delivering positive growth, delivering growth of 6.5% in the quarter. In U.S. pediatric, we exited the quarter with the full benefit of recent WIC contract wins reflected in our run rate. And as a result, Abbott is now the market leader in both WIC and non-Wic segments. In Adult Nutrition, we continue to see positive volume trends in response to the price actions implemented late last year. In the U.S., retail consumption of insurers increased double digits compared to consumption levels exiting last year and achieved the highest year-over-year consumption growth in the past 1.5 years.

We're also making good progress in our international adult nutrition business where sales continue to grow sequentially and are now approaching levels similar to this time last year. We're also benefiting from sales contributions from new innovation, including new versions of ensure that feature higher protein, lower sugar and refreshed labeling and packaging.

So overall, I remain encouraged by the progress we are making and confident in our outlook for the second half of the year. Turning to EPD, where we continue to deliver consistently strong performance. Sales grew 9% in the quarter, reflecting broad-based growth across our largest markets, including India, Latin America and Southeast Asia. This performance reflects the disciplined execution of our teams and the growing demand for health care in emerging markets. This demand is a result of evolving market dynamics, including expanding access to health care, aging populations and a rising need to treat both acute and chronic conditions. These structural tailwinds, combined with our broad portfolio, expanding pipeline of biosimilars and strong brand equity position EPD to sustainably deliver high single-digit sales growth.

And I'll wrap up with Medical Devices, where sales grew 8.5%, growth of 8.5% in our cardiovascular device portfolio was led by low-teens growth in electrophysiology and high single-digit growth in Rhythm Management and heart failure. In electrophysiology, the second quarter marked the beginning of an acceleration in our growth trajectory. We launched our next-generation Bolt PFA catheter commonly referred to as Volt 2.0 in the U.S. in May, and we expect to transition from limited market to full market release in the third quarter.

Internationally, the expanding rollout of Volt and TactiFlex Duo is gaining strong traction, driving growth of more than 20% in Europe. We remain confident in our outlook for the second half of the year, including our expectation to begin outperforming the market and recapturing share. In Rhythm Management, sales grew 9.5% as we continue to expand the use of AVEIR across both the single and dual chain segments of the pacemaker market and drive broader adoption of this innovative technology internationally. In heart failure, growth of 9% was led by double-digit growth in the U.S., driven by our market-leading portfolio of heart assist devices that address both chronic and acute patient needs.

In Diabetes Care, continuous glucose monitoring sales exceeded $2 billion, reflecting growth of 9.5% in the quarter. In May, we secured CE Mark for Libre Duo, the world's first dual glucose ketone wearable sensor. We will begin the international rollout of Libre Duo in the fall, and we look forward to bringing this innovative new technology to the United States market after we obtain FDA approval. So in summary, we remain highly focused on disciplined execution each quarter. Our second quarter results represent an important building block as we move into the second half of the year. We have momentum building across the portfolio and clear line of sight to the key drivers of sales growth acceleration that are forecasted in the second half.

Our continued focus on gross margin expansion gives us confidence in raising our full year EPS guidance. And we have several new products that we anticipate launching at a steady cadence over the next 12 months. And now I'll turn over the call to Phil.

Thanks, Robert. As Mike mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on a comparable basis. Turning to our second quarter results. Sales increased 4.8% on a comparable basis and adjusted earnings per share of $1.31 exceeded the midpoint of our guidance range and the consensus estimate. Foreign exchange had a favorable year-over-year impact of 0.8% on second quarter sales. which was a slight improvement compared to our expectations at the time of our earnings call in April. Regarding other aspects of the P&L, the adjusted gross margin profile was 58.0% of sales representing an increase of 100 basis points compared to the prior year. The improvement was broad-based, reflecting favorable business mix within the legacy Abbott portfolio and from the addition of Exact Sciences as well as the continued operational improvements and disciplined execution of our margin expansion initiatives.

Adjusted R&D was 6.9% of sales and adjusted SG&A was 28.6% of sales. Based on current rates, we expect exchange to have a positive impact of approximately 1% on full year sales, which includes our expectation for exchange to have a negative impact approximately 1% on third quarter sales.

For the third quarter, we forecast adjusted earnings per share of $1.38 to $1.46. With that, we'll now open the call for questions.

[Operator Instructions]

And our first question comes from Robert Marcus from JPMorgan.

Great. Robert, if I may, two. One, a market question, one in Avid question. And if I start with the market question, I think a theme that a lot of investors are focused on, given some of the negative pre-announcements out of the hospital sector is the potential for decelerating procedure volumes particularly in the U.S. We heard from J&J yesterday that they're not seeing any signs to that. We heard from you this morning particularly on the diagnostic volumes where you have a great view into forward-looking volumes it sounds like you're not seeing anything. So I'd love to hear your view on the health and the forecast of procedure volumes in the U.S. and what you're seeing and expecting.

Sure. Yes, I mean, that seems to be a topic of concern for investors. I think it's less of a concern for -- it's less of a concern for the companies, I think at least the companies that are in the markets that we're operating. And I think there's a couple of reasons for that. I mean I think some of the concern for the decline in volumes is tied to kind of challenges with the ACA, lower enrollment rates or dis-enrollment rates in Medicaid. And I think that's that's a flawed assumption, Robbie, as it relates to the med tech and diagnostic space. If you go back to when the ACA was implemented, really the pharma companies that predominantly benefited from new patients coming into the market. We didn't see that in med tech or in diagnostics. We didn't see a spike in demand when the AC and the expansion of Medicaid happens. So I think it's logical here to assume that if we didn't see the benefit, I don't think we're going to see the downside if that truly is what's happening.

And I think one reason for that is that it's not Medicaid that is a driver of medtech surgical procedures in the United States. It's actually Medicare. Medicare is by far the largest U.S. payers as it relates to as it relates to devices. For us, it's over 2/3s of our U.S. cardio business. So I think that's one reason.

The other reason that believe it's not a concern, at least right now, not seeing it, is that not all health care products are the same here, right? So demand for demand for like, say, like high acuity life-saving products is very inelastic. In the U.S., we treat people with serious acute medical conditions and the system doesn't -- system doesn't save lives of only those people with insurance, right? And that's why we didn't see the impact of expansion of ACA and Medicaid into the business because those patients were already being treated. And then if you look at our portfolio, it's really tied and maybe this is a little bit more of an Abbott side. We're really tied to a lot of major chronic conditions like diabetes, cardiovascular, cancer, and this is less likely to forgo insurance.

So I think that's 1 reason. I think the other reason is our data is not showing that, Robbie. And I'm not referring just to our weekly sales and things like that. It's just looking ahead. I think 1 of the benefits of our diverse model here is that it really provides a pretty holistic view of the entire health care system, not just in the U.S. but globally. And I think as you mentioned -- my prepared remarks, we look at our diagnostic business is not obviously a great business to be in, but it also provides us, I think, forward-looking into the health care environment in the health care system. And our instruments are located across the world, across the country, all in the states here in the U.S. and testing volumes in the U.S. have held up very well, not seeing a decline including in the state that we've seen the highest level of ACA dis-enrollment. So we've gone as deep as looking at it from that perspective. Our U.S. core lab business has accelerated growth in the last 2 quarters. Our print here is about 7.5% this quarter. But if you unpack that, we've got a couple of different segments in our U.S. core lab business, Robbie, labs and then specifically hospital labs. So these are our business of selling instruments and reagents, specifically for hospital and in-hospital testing.

That business was up 13% in this quarter. So I think if I look at the diagnostic system as a forward-looking barometer there. We're not seeing that. We're seeing strong demand for our U.S. cardio business. I'd argue that our U.S. cardio business is performing better than it's ever been. And we're seeing that same similar strong stable demand internationally, both in developed and emerging markets. So I feel very good about overall health care markets and especially our markets.

I think -- I think I said this publicly about 1 month, 1.5 months ago, I continue to believe that health care demand is just going to continue to accelerate as we see this aging population dynamic, I think every day in the United States, you have 10,000 people that turned 65 and age is a driving factor of health care. So I think this aging population is a global dynamic. And I think the demand is -- right now, we don't see it as a concern.

Well, that's great to hear it. Maybe just a quick follow-up. One, Abbott-specific. It was good to see a small beat on organic sales in second quarter. The forecast includes an acceleration in third and fourth quarter. I would love to hear how you're feeling about the confidence level and that acceleration in the second half? And if you don't mind just highlighting some of the key growth drivers that get you there.

Sure. Well, I'm feeling very confident, as I've said, but that feeling of confidence is really driven by a lot of hard work that the team is doing. I think Q2 results showed that we've got momentum that's building. Our growth rate stepped up to mid-single digits from where it was in the last 2 quarters of low single digits. Sales dollars, sales growth rate, all of that accelerated each month during the quarter. So as you look to the second half, you've got a lot of businesses, I'm sure we're going to touch on a lot of them here, but a lot of the businesses that are doing strong growth rates, and we forecast and continue to do those strong growth rates. But the lift in the second half, 80% of that lift, going to call a trajectory shift is really coming from 4 areas: nutrition, electrophysiology, Core Lab and cancer diagnostics. And each of these 4 businesses are entering with a lot of momentum and line [indiscernible] -- line of sight to the drivers of the business. And I'm sure we'll touch -- double click on and all of them during the call here. But listen, nutrition is tracking slightly ahead of expectations. Several of our strategies, whether it's pricing, new product launches, commercial execution, that's all being done very well by the team. In EP, we've got a lot of great launch activity, a lot of good feedback on our new products.

So I expect the second half of the market to really show that growth acceleration that we've been forecasting. In our core lab business, listen, our businesses have performed very well across the world. We obviously had the challenge of the VBP in China, where we had a pretty sizable portion of our international business declined for at least 5 quarters, around 30%. We're still forecasting a decline in the China business, but much, much lower mid-single digits. So that allows some of the other businesses that have continued to do very well and actually accelerate to kind of overpower that China impact. And then cancer diagnostics, very good trajectory there, especially with new Colguard users. They're exceeding our expectations. And I've learned a lot about these care gap programs. I got confidence in them. We've got a lot of work around them. And so I'm confident in that. So it's really those 4 businesses that represent significant ship. Obviously, all the other businesses have got to continue to do well, and they've got all their strategies. But if I were to kind of really focus on what's going to drive that second half, it's these 4 areas here. And they're actually going into Q3 with a lot of good momentum, some of them are a little bit ahead of what we thought we would be at. So we feel good about that second quarter acceleration.

Our next question comes from Larry Biegelsen from Wells Fargo.

So Robert, I'd love to double-click on Libre. If you could talk about the Libre trends in the U.S. and international. I think you only reported worldwide growth of 9.5%. What's the outlook for the CGM business, the remainder of this year? And what's your latest thinking on the U.S. timing for the dual ketone glucose sensor and type non-insulin coverage? And just lastly, can these accelerate your CGM growth or just maintain the current rate?

Sure, Larry. I love your characterization of only 9.5% on a $2 billion quarterly business. But I get where you're coming from because we've had higher growth rates. So I get that. I understand that. Let me see if I can unpack this a little bit, so we can kind of all get centered around this very important market of ours and how we see it. I'll get to all your questions, but let me just kind of talk about this, and I've said this a couple of times on other earnings calls. We remain very bullish about this market, Larry.

As I've said in the past, you've got 75 to -- you've got 75 million to 80 million people around the world that could realistically be on a CGM and you've only got 15 million so far. So there's still plenty of opportunity for growth and growth and growth acceleration. And I think it's very sustainable.

There's a lot of building blocks to be able to unlock that opportunity. I'd say the #1 or the one that we've seen that has the most immediate impact and pretty significant to unlocking these opportunities is really reimbursement expansion. And we have a lot of reimbursement expansion opportunities in the funnel. We're in active discussions with a dozen or so countries that are either looking to introduce or to expand reimbursement.

And the reason they're having -- we're having these discussions to expand or introduce these categories or expand the category is because of the robust clinical data that's been developed over a decade with this technology that supports widespread adoption. We've generated data that shows that our competitor has invested and generated data that supports that. And the data is pretty resounding. It lowers A1cs. It reduces hospitalizations. People spend more hours per day in a normal glycemic range and that has measurable outcome discussions to the health care system.

The challenge, Larry, is is actually trying to pinpoint the exact month or quarter as to when that reimbursement expansion is going to happen. Like you mentioned in the U.S., and we're going to be talking about that, but it's difficult to forecast that. I would actually say it's easier to forecast the conversion of an existing eligible reimbursed patient population, the penetration of the technology and how that runs than it is to try and pinpoint when these reimbursement expansions happen. And I think when you go through a period of time like that, without a major reimbursement expansion. You see this kind of market growth plateau. And when I say plateau, I'm referring to like 8%, 9% growth, which like I said, I don't think is a bad -- is not a bad growth rate. It's just not as high as what we've seen before. And to your point on does it -- do these things keep you at this growth rate? Or does it accelerate? It drastically accelerates it, right? Like any one of these markets that goes to reimburse an expansion or introduction of reimbursement it dramatically accelerates the growth rate as we've seen in the past, Larry, and you've a company this segment, that has significant impact.

The challenge is not if these countries adopt it. The question is when and how to forecast it. And it's difficult for me to -- with a business of this size to try and pinpoint the exact reimbursement. But I can tell you, we are very active and active discussions with very large markets to expand or introduce reimbursement.

If I look ahead of some of the key reimbursement expansions that are coming, obviously, the U.S. type 2 is a huge opportunity. It's going to unlock around 10 million Medicare beneficiaries. It's going to accelerate commercial insurance coverage. This could be a multibillion-dollar opportunity and it could happen in the fall. I just can't forecast it exactly -- when exactly it's going to happen. But when it does happen, it is going to definitely accelerate our sales, and we're planning and positioning ourselves to be in the best possible position as it relates to sales force distribution, et cetera, to be able to capitalize on that opportunity.

The international basal coverage expansion, I mean, right now, with all the work that we've done, I'd say you've got France, you've got Japan, you've got Canada that have broadly adopted this. Those are 3 markets that are in the top 10 international markets. There are another 7 markets here that are pretty significant [ mover ] some larger than these markets that we'll have -- that we're having discussions.

And given the clinical data, given the pressure from the societies and the patient populations, those are going to happen also. I just can't call it to the exact quarter. So these reimbursement opportunities, they're going to accelerate it. And until that happens, I guess I'd say, yes, you're at this like 8%, 9% growth rate, which on a $2 billion or approaching $10 billion business, that's not a bad business to be in. And I would say -- and I would say we feel so strongly about the -- about this market and the ability for this market to accelerate and continue to grow and the potential that exists that we're probably in the final stages here of planning for a fifth manufacturing facility. We got our facility up, our last facility, our fourth facility. We got up and running probably in the 2024 time frame, given the trajectory that I'm seeing right now, that's a $100 million sensor facility. We're probably going to be bumping up against capacity at that facility probably in the next couple of years.

So we're already looking at our fifth facility. It will probably be a $1 billion investment that we're -- right now, we're looking at where we're going to make that investment, whether it's going to be in the United States, internationally, if it's going to be in the United States, what state we're going to do. So we feel good about this market, Larry and we've got plenty of growth drivers here. I just go back to -- you've got 80 million people that can use this product and clinical data suggests that they should be using the product and the health care systems will benefit when they do use the product. And currently, we're at 15 million.

So I feel very good about -- I feel very good about our business and about our position. Regarding -- I think you had a question about -- well, you had a question about timing of CMS expansion. I think I answered that. And then timing on DGK in the U.S. I'm not going to try and forecast that one either. But what I will say is that the discussions are in, I would call very, very advanced kind of final stages, and I'm not going to try and forecast that. As soon as we have it approved, we'll issue a press release and we'll go and start preparing the market. But we are hearing great things from -- already from some of the -- from some of the European physicians that have had some early access to the product. So we feel good about that. And we got a lot of product innovation coming too, Larry.

I mean I know there's a lot of focus here on DGK. We probably had 2 more programs that I'm not going to talk about for competitive reasons here, but that's going to be another another driver of growth for us, too. So again, I feel good about this market. We're making the investments. We believe in the growth trajection, the potential that exists in it, and we're full speed in execution.

Robert, thanks for the comprehensive answer. Just to set the record straight. I would say you only reported worldwide growth. I wasn't criticizing the 9.5%, but I just wanted to be clear about that.

You can criticize, Larry. That's fine. We are -- this is a good business, and it's doing very well. I know it gets a lot of attention for -- because of us and the competitor. But it's a good business. There's a lot of opportunity here. I'm just trying to provide context of the opportunities and how this will accelerate given reimbursement expansions.

Our next question will come from Vijay Kumar from Evercore ISI.

I want to dive a little bit on Exact Sciences. Business did, to your point, slightly north of 13%. I think I think you're assuming a step-up in back half, maybe 16%, 16% plus. And a lot of that is driven -- maybe some of that is pricing, some of it is care gap. So my question is, how much visibility do you have on these care gap programs in the back half stepping up for Exact Sciences. And I think a related question was [indiscernible] just present at the redo data advanced adenoma detection rate was north of 18%. I think that's well above your competition. So when you think about the blood side of CRC screening, do you still expect Abbott to be the market leader on the blood side even though your entry into the market will be slightly behind Garden.

Sure. Yes, we grew 13% in the first half. Our deal model that we put together to support the acquisition for 2026 at mid-teens, I feel confident that we'll achieve that. The model called for second half being higher than first half. The integration is going very good, very well. We're not seeing any kind of issues or disruption. I'm just very impressed by the team there and their understanding of the market and they've done a good job here at making sure that I understand all the different detailed kind of elements of how this market works and drives.

To your point of the care gap, car volumes ramp in the second half. And that's what's going to help drive. It's not just that, but it's a contributing factor to the acceleration in the second half. KGAAP programs really are they help the health systems achieve their HEDIS credit, their CMR Star ratings. And that focus from the health care systems for some reason, tends to happen in the second half. So they're looking at their scores, they're looking at their ratings and they're looking at ways at how they can ensure that they're achieving their targets. That seems to happen a lot in the second half.

Do we have visibility? Yes, we absolutely have visibility. We have -- the team is an incredible team there in terms of their market access team. They've got work to do. There's no doubt, but there's a lot of visibility to those programs, and there's a lot of conversations that are happening with the health systems. They're seeing a need to continue to push on earlier detection of Cologuard. So I feel good about the ramp-up of the care graph and the visibility to that.

You mentioned price being an element there. So as we transition from Cologuard to Cologuard Plus. That's a little bit of a tailwind also. But I think there are a lot of key growth drivers here in the medium and long term, Vijay, and they're all looking very good. If you look at the growth from Cologuard users, they're exceeding our expectations. So there's a certain forecast of how many new users we will be able to bring in and the team are actually exceeding that target. The number of repeat users in Cologuard, we talked about the rescreen. That funnel is expanding and it is extremely reliable in terms of -- since we have the names, people want to stay up to up to date with their screening.

So that rescreen funnel is expanding, and that's a great opportunity for us. Obviously, Cancerguard, we're investing in that launch. We're going to be reviewing some of our next MRD next-generation MRD data will be coming out also. There's international expansion. I've been involved in some of the discussions around that, and we're going to be making some pretty interesting progress there with certain governments.

And then to your point, the ability to add a blood test to the portfolio is going to be, I think, extremely attractive for us. Now as you know, blood tests, they're obviously very -- a little bit more convenient. I think Cologuard is pretty convenient, but I would say blood is a little bit more convenient than that. But it has a problem, which is it doesn't have the same sensitivity as it relates to detection of precancerous polyps and an earlier-stage detection, right? And when you think about screening, that's super important. So I think we'll be the only company to say, will you be a leader in blood? I don't actually see it like that, Vijay. We want to continue to be the leader as it relates to screening and now you're going to have a company that's going to have the opportunity to not only offer best-in-class stool test, but now we'll also have best-in-class blood test.

And I think there might be opportunities. I think as you saw some of the guidelines come up from the American Cancer Society, there is a preference and a drive towards Cologuard, but if you've got -- you still have a lot of patients that aren't up to date with their screening or haven't done screening, whether it's colonoscope or Cologuard, and that will be an opportunity for us. So that will be a new market. And I think the way I view it is, okay, we'll bring these patients into these consumers into our screening funnel, and then we'll be able to educate them on the benefits of Cologuard.

So I think we'll be in a great position as it relates to being the only company to have both stool and blood and be able to kind of support the health systems with that, even with that precancerous detection being lower than Cologuard doing a blood test, if you're not doing anything, it's is probably a good first step, but then you want to actually start to do it with a Cologuard test. So again, I see a lot of great opportunity in our cancer diagnostic business.

The integration is going very well. I continue to be very impressed with this team and their understanding of the market that they've built and their plans to continue to drive it.

Our next question will come from Matthew Taylor from Jefferies.

I thought I'd be worth spending a minute on EP given you have this nice series of launches here, you seem to be gaining traction with Volt already. Could you comment on market dynamics and your aspirations in the market? Maybe just talk about how you think the AF market will continue to grow. And I know you're committing to growing above market in the second half. Could you talk about how that could continue into next year and the kind of share aspirations that you have?

Sure. I'm not going to give specific targets on share. I think what I'll leave it right now is, yes, we do expect to grow faster than the market. And I think we're entering this phase here where we'll start to outperform marketing capture share. I think we saw early signs of that in Q2, Matt. Sales increased every month in the quarter and very good progress there.

But I think what we'll really start to see that happen in the second half as we transition from a limited market release to full market release of Volt in the U.S. and then continue to roll out TactiFlex Duo internationally. We continue to get very good feedback from physicians and doctors around the world that are using the product. I say Volt for me, what I hear a lot about Volt is just the continued integration to the mapping system and not having to not having to use a mapping system or a mapping infrastructure that's a little bit subpar versus where the market-leading mapping systems are. So now you don't really have to take that step back a little bit. You've got a PFA catheter that's got very good map integration. Opportunity, especially here in the U.S., I keep hearing that for ASC and ASC adoption given the open footprint of the mapping system and the ability to do these cases with general sedation, just with sedation versus general anesthesia.

So those are kind of the -- and then the ability here, given the contact, we've got to prove this out a little bit, but given the contact and integration with mapping and the visualization of that, ability to deliver better outcomes by producing more doable lesions. So Volt is getting great feedback, and we feel good now that we can move to full market release. TactiFlex Duo, this is coming on the chassis of a very well-liked and understood catheter in the TactiFlex chassis. So that's been recognized for uses versatility, pretty seamless transition between PFA and RF. So see nice share capture trends in Europe. Our AP business was up 20% in Europe in the second quarter. So that's good. I have high expectations for both these catheters, but as I've been pretty clear over the last couple of years, our growth strategy is not going to be built off like 1 product or 1 catheter that we've got to kind of monitor it closely and see -- like yes, these catheters will drive a lot of growth.

But we're in the -- we believe that our right growth strategy is to really focus on selling the entire procedure. And that's why we've been focusing on not just on these PFA catheters, but also on the mapping systems, all the ancillary, the diagnostics, the introducers, the ice catheter. I mean all of that matters. And that's what our focus is here is to really position ourselves as a leading company in this space. And we've got a nice pipeline of PFA catheters still in the works. So between now and 2029, we'll have iterations and new versions and new ideas come out. But we're also equally investing in mapping and ensuring that our mapping superiority is maintained as obviously, competitors are launching their own mapping systems.

So we'll continue to invest in that also and our ability to stay ahead is, I think, is very strong. So I think from a forecast perspective, I expect global EP growth accelerate. It's in the teens right now. It will accelerate in the second half, for sure, and outperforming the market. And I expect that momentum that we're building this year to carry through to next year. And I think we'll get an additional boost into this EP portfolio with our new LAA device. I think feedback there has been extremely positive. And we filed with the FDA. I think here, I probably feel a little bit more comfortable saying, I can see a potential to be able to get this approved by year-end. And then with that, we'll have strong momentum going into next year with both rollout of TactiFlex Duo in the U.S., continued acceleration of both in the U.S. launching our next-generation LAA device also. So I see that momentum continuing into next year.

Next question comes from Travis Steed from BofA Securities.

I guess as we move into the second half of this year, investors are going to start looking more into next year. Just curious how you think about the Abbott portfolio in the next year. This is kind of a year that step-up for better growth, you've got easier nutrition comps, expanding coverage in Libre. You talked about EP accelerating in the next year. MLA launching at the beginning of the year. Just curious at a high level how you kind of think about the Abbott portfolio in 2027 in growth.

Sure. I mean it's well early to give exact guidance in 2027. But I -- listen, we have a target always of targeting high single-digit growth on the top, double-digit on the bottom. I previously referenced 7% as a very kind of sustainable growth rate. I believe 7% is still the right target despite there being a much larger base today versus where we were several years ago. It's probably only -- I think I looked at this, there's only like 5 health care companies with sales over $30 billion that are growing at least 7%. So I think we have a differentiated portfolio here, a very resilient portfolio. And I think, as I said, the strategy here of what we've been doing over the last couple of quarters to get us in into that 7% top line growth rate.

And I think it's really driven Travis by looking at the portfolio and in the execution. If I look at the 4 segments, again, I'm not providing 2027 guidance. But when I look at each one of them in their ranges, nutrition has been a 2% to 4% grower. And I think that's probably, as we think about it going forward, that's probably the right range to be thinking about. Our diagnostics portfolio with the addition of Exact, the VBP impact in China subsiding a little bit is now a 7% to 8% kind of range that we think about. Our EPD business has reliably done this for like 5 years, like 7% to 9%. And medtech, we view as kind of an 8% to 10% grower. So the low end of that range is around 6.5%. The high end is around 8.5%. So I think 7% is is a pretty sustainable kind of growth rate going forward.

And that's what we target high single digit, double-digit EPS growth. And I think we're well positioned, executing what we're executing in the second half and the portfolio we have, I think the sustainability of that 7%. And then obviously, all the pipeline, I mean, we've got programs that we're going to start in Q4, at least from a trial perspective, that are going to start to deliver contributions in '29 and '30. So yes, we're thinking about '27 for sure, but we're also thinking '28, '29 and 2030 and one of the things that we need to be able to kind of sustain that top line growth rate.

Our next question comes from Josh Jennings from TD Cowen.

I wanted to just ask on the structural heart unit. I mean I think your team has been pretty clear that it may take some time for the U.S. franchise to regain its foundation. But any help just thinking through some of the strategic initiatives, either on the commercial infrastructure side pricing in front of some of the innovation that you've talked about, Robert, on with the balloon expandable TAVR and the mitral replacement valve that's in development.

Just help us think through when can the structural heart franchise start to see improved growth in trends is that 2027 and to your answer to 1 of your last questions on the 2027 outlook, I mean, maybe soft comps for '27 in structural heart get back in the group next year.

Yes. Listen, I expect structural heart by the end of this year to be in that kind of mid- to high single-digit growth rate back to where we were before. I think that I've been pretty pretty clear about where we're falling short. It's not a price issue. It's not a product issue. It's really kind of how we think about -- how we think about competing in the mitral space, specifically in the U.S., we've seen competitive intensity increase there in that here in the U.S. And I mentioned that during our last earnings call, I said it was going to take us a couple of quarters, Q2 is the first one. But I think by the end of the year, I think you'll start to see that start to change. We've made changes. We made personnel changes.

We've also looked at how we're approaching the market. It's not a pricing thing. It's just more about how we think about -- we have one of the most comprehensive and broadest portfolios in structural heart. And I think that our team is kind of trying to figure out a better way of how to position that full portfolio.

We're showing good growth and tricuspid. We've shown good growth in TAVR here in the U.S. We've got to do a better job in mine from the team knows that. They're motivated. I've met with them and they're determined to respond to the challenge. So U.S. has got some work to do. We've had a lot of work this quarter. I expect to be a lot of work in Q3, and I think you'll start to see that change in Q4. I will put a plug-in for the international team. I think the international team has been able to grow double digits in the first half. TAVR was up 30% in the first half, MitraClip and TriClip and our structural interventions portfolio. I mean all of that has grown really strong. So that international team has done a really good job, and there are things that the U.S. organization can learn from some of the strategies that have been developed there.

So work to be done there. But I still think that this is probably one of our key growth drivers. If you think about the pipeline that we're assembling, you've got a lot of you've got guideline changes, you've got product launches. We just launched TriClip in Japan. Label expansions, pipeline, I think Cephea going into trial, I continue to just only hear incredibly positive about this mitral valve replacement, I think we have the potential to live up promise that we thought maybe a decade ago in 2015 when everybody was making investments in mitral believe that it could be just as big as TAVR.

I actually think now with this product, we have the potential to actually make that a reality. So we've got a lot of momentum here. And I think in the short term, we're dealing with some improved commercial execution that we've got to do. And I've got trust and confidence in the team that they know what they've got to do and they'll deliver.

And our next question will come from Joanne Wuensch from Citi.

The broad guidance, guidance commentary on nutrition for 2% to 4% is a nice acceleration off of the last couple of quarters. It sounds like you're getting some good momentum out of the WIC contracts. Is there an update that you can give us sort of a state of the union of what you're seeing in terms of launching some new products as well as market positioning.

Yes, absolutely. I think I mentioned in our first -- in our Q1 call that we were tracking according to plan, that was back in April. I'm reiterating that same message here. We remain very much in [indiscernible]. There's a lot of proof points here, Joanne, in terms of being able to feel confident about not only the acceleration in the second half, but establishing this kind of 2% to 4% kind of range here for this business. About $125 million of sequential growth, as I said in my prepared comments. And what I liked about it as we're looking at it every single month, it was getting better.

So a couple of highlights, I guess. On the pediatric side, as I said, the international portion is now back to positive growth. I actually had the highest -- our sales in international PDAC has been the highest in the last 2 years or so. So I think the team is doing a good job there. International pediatric, we referenced the contract -- the WIC contracts. Those are now fully baked in and we're back to market leadership after 6 months of very hard work out in the field. So the team has done a good job there. On the adult side, which is probably where the pricing strategy had more of an impact or at least we expected it to have more of an impact.

I think the volumes are responding very positively to that. Retail consumption of insure in the U.S. is up double digits versus our exit in 2025. Of course, that's a pretty low point here. But if you look at it from a year-over-year perspective, like I said, it's 1 of the highest growth rates we've had in over 1.5 years from a consumption perspective.

So you've got the volume consumption now chewing through that price that we had to -- that we took in Q4. And I expect both these businesses now adult and pediatric to go back to a positive territory as we've worked our way through all the inventory and the new pricing. So I think Q3 will probably be the most, I'd say, cleanest quarter. Obviously, Q4, you have a pretty big comp issue, right, which is why I -- if you look at the exit rate, we're going to be in that 2.5%, 3% if you take it on a 2-year CAGR. So that's why I'm anchoring this kind of 2% to 4% trajectory. The new product launches are doing very well. There's obviously a lot of focus on protein, especially with GLP users, and we've been trying to offer something that's a little different, not just the protein but also protein with less sugar because a lot of the products that are out there have -- they taste very well, but they [indiscernible] because there's a lot of sugar.

And some of the companies that are marketing these products, they're notorious for knowing how to work with sugar. So I would say we've got good momentum from the marketing messaging around high protein and low sugar. And then we've got a bunch of upcoming product launches. I think probably the ones I'm more excited about is we've got a collagen protein shake that's coming out. We'll be offering a new adult product that will have not only protein and HNB, but we're going to be adding creatinine sorry, create into it.

So that is going to be a very strong focus, and then we'll be also launching a new infant formula in the second half using whole milk. So I think that the execution here, if it's state of the union here, Joanne, is, listen, I think the team has responded well to the challenge. There are obviously things that we can continue to do better. We know what they are. We're going to continue to focus on that. But I think right now, the trajectory and the plan that we had. We're a little bit ahead of that. I'm not going to change that guidance right now based on 2 quarters. But you could see if we can continue to maintain this momentum and and continue to surpass what our expectations were there might be an opportunity here to kind of rethink about the guidance business.

But right now, I think we're in the right spot, and this is just about execution and developing proof points that we're moving forward and that the strategies that we put in place are reigniting the growth in this business.

Crystal, we'll take 1 more question, please.

And our last question will come from Marie Thibault from BTIG.

I wanted to circle back here on Amulet and the left atrial appendage closure market. You certainly got a really exciting product catalyst ahead with Amulet 360. But I just want to understand what Abbott is seeing out there in the market today. Certainly your competitors talked about some challenges they're facing. So I just want to understand sort of the appetite for left atrial appendage closure today.

Sure, Marie. I mean, this is ultimately a very attractive market, which is why we continue to make the investment. It's a $2 billion market. The competitor has a 90% market share. So to be honest with you, given the market share differences there, I will defer to our competitor to specific or more specific market growth projections here, Marie. My focus and the team's focus here is on market share capture. I think this represents a big opportunity for us. Data and feedback from Amulet 360 has been fantastic, actually. You now have what was known as a superior product to be able to actually feel the LAA now with 360 to have a much more seamless implant experience for the physician. So I think that this is going to bode well for our AP business. As you know, the LAA is increasingly becoming an EP procedure. And if you think about where a lot of the growth is coming from, it's coming from the concomitant segment. And I think we're well positioned there to be able to kind of drive market share. I think this -- it's not by accident that we move this portfolio from structural heart into our AP business because we believe that the winning company in this space, not only have great PFA catheters, great mapping systems, great field mappers, but you also got to have a great LAA device here to be able to do that. And I think we're way ahead from our competitors from that perspective.

So listen, I think this is an attractive market, about its future growth projections. I mean, we could probably lay out the opportunities that exist there. But my more immediate opportunity for Abbott is to be able to kind of gain market share. We're going to have an opportunity to to essentially relaunch a product, you don't get a lot of opportunities like that. We'll leverage some of the lessons we've learned, and I'm pretty confident here that we'll be able to have this be a nice growth driver for us in 2027 and beyond. I actually think that this idea of concomitant procedures with LAA aren't just restricted to the electrophysiology segment. I think there's going to be opportunities in the interventional cardiology side also to think about. So the way we think about it is, yes, there's an opportunity over here we're going to focus on market share. But there's -- I think there's also a market development work to happen both on the EP side but also in the inventional side, too. So a lot of work going on there, but I'd say very excited about bringing this next-generation product to market and feel good about the market and the product we have and the team that we got.

So with that, I'll just close on the comments here since we're up on time. I'd say good progress on addressing what are these, I'd say, short-term and kind of temporary challenges that we've highlighted in January. So very good progress there. I think we're entering the second half with a lot of momentum, several of our key growth drivers. We know what they are. We know what we need to do, and that's what we're focusing on every single week and month on execution to the targets that we've set for ourselves. So my confidence remains high in that second half acceleration. The efforts and focus that we put on gross margin and our gross margin expansion strategy, both from a mix and cost mitigation they're having an impact, and that's allowed us to raise our full year EPS guidance, and we raised it more by the beat that we had in the second half because we believe that the sustainability of this expansion is there.

Our cash generation and cash flow management are likely going to put us ahead of our January forecast for the year, and that's going to just allow greater flexibility here for capital return. And I'm extremely excited about the pipeline that we built both for the products that we're launching and the future product launches that we're going to have over the next 24 months. I think it gives us confidence that we've got a lot of momentum that we're building is sustainable as we move into '27 and '28. So with that, I thank you for joining us today.

Thank you all for your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11:00 a.m. Central Time today on our website, abbott.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.

Good morning, and thank you for standing by. Welcome to Abbott's First Quarter 2026 Earnings Conference Call.

[Operator Instructions]

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 expressed written permission. I would now like to introduce Mr. Mike Comilla, Vice President, Investor Relations.

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Phil Boudreau, Executive Vice President, Finance and Chief Financial Officer. Robert and Phil will provide opening remarks. Following their comments, we'll take your questions. Before we get started, statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2026.

The 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, 2025.

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 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's results in accordance with GAAP. We Unless otherwise noted, our commentary on sales growth refers to comparable sales growth, which includes the prior and current year sales of Exact Sciences, a cancer diagnostics company that Abbott acquired on March 23, 2026.

Our definition of comparable sales growth can be found on Page 2 of our press release issued earlier today and a reconciliation table that contains data needed to calculate comparable sales growth can be found on Page 13.

With that, I will now turn the call over to Robert.

Thanks, Mike. Good morning, everyone, and thank you for joining us. Our results in the first quarter were aligned with our expectations for the start of the year. That included delivering adjusted earnings per share of $1.15, consistent with our guidance despite absorbing the impact of earlier than planned financing costs related to our acquisition of Exact Sciences and a weaker-than-expected respiratory season. This quarter also marked an important strategic milestone for Abbott with the completion of our acquisition of Exact Sciences. This acquisition adds a new high-growth business to the Abbott portfolio. further strengthening our leadership position in diagnostics and expanding our presence into one of the fastest-growing areas of health care cancer diagnostics.

As we communicated at the time of the acquisition announcement, we forecast the addition of Exact Sciences add approximately $3 billion of incremental sales in 2026 and accelerate Abbott's long-term sales growth rate. Before I summarize our first quarter results, I wanted to highlight a few pipeline achievements in our Medical Device business, and those include an earlier-than-planned approval and launch of 2 new PFA catheters, completion of patient enrollment in our catalyst, left atrial appendage device trial, initiation of development activities to bring an implantable extravascular ICD product market and the announcement of positive results from our randomized controlled trial, which demonstrated that people with type 2 diabetes on basal insulin therapy benefited from using Libre, including seeing reductions in HbA1c and increased time spent and healthy glucose range. In addition to these achievements, our teams are preparing to initiate patient enrollment in several important clinical trials in the second half of this year. These trials represent a unique opportunity to position Abbott to bring a new wave of highly differentiated technologies to the market.

This pipeline of new technologies includes a balloon expandable TAVR valve, a leadless conduction system pacing device that utilizes our revolutionary other leadless pacemaker, a mitral replacement developed following our acquisition of Cephea Valve Technologies, a peripheral IVL device developed following our acquisition of CSI and a wearable continuous lactate monitoring sensor that will monitor [indiscernible] following discharge from a hospital.

I'll now summarize our first quarter results before I turn the call over to Phil, and I'll start with Diagnostics, where sales increased 2% on a comparable basis. In Core Lab Diagnostics growth of 3% was driven by growth in the U.S., Europe and Latin America. Sales of Core Lab diagnostic tests which excludes capital equipment and digital health solutions, increased on both a year-over-year and sequential basis, and this is a trend that we expect to continue and drive higher growth in the second half of the year compared to the first half.

In our Rapid and Molecular Diagnostics business, sales declined 10%, reflecting lower demand for respiratory virus testing due to a much weaker respiratory season compared to last year. And in cancer diagnostics, sales grew 13% on a comparable basis, driven by mid-teens growth of Cologuard and high-teens growth in international markets.

Moving to Nutrition where sales finished slightly ahead of our expectations for the quarter. As discussed on our January earnings call, results in the quarter reflect the impact of lower sales volumes compared to the prior year and the effect of strategic pricing actions implemented in the fourth quarter of 2025 with an objective of reaccelerating volume growth.

While we are still early in the transition back toward a more sustainable balance between price and volume-driven growth, I'm encouraged by the progress we're making. Early data indicates we are seeing the intended effect with volume growth beginning to follow our pricing actions. We continue to expect that these pricing actions, combined with the launch of several new products will result in growth improving over the course of the year. Turning to EPD, our Pharmaceutical business, where sales increased 9% in the quarter. Growth was broad-based across the markets we serve, which included double-digit growth in several countries across Latin America and Asia Pacific regions.

Demand in these markets continues to be supported by favorable long-term health care economic and demographic trends with a broad product offering across 5 therapeutic areas and an expanding biosimilars portfolio, which includes several market-leading oncology therapies, we are well positioned to serve the growing customer base in these markets. And I'll wrap up with Medical Devices, where sales grew 8.5%. Growth was led by strong performance in our cardiovascular device businesses. This included double-digit growth in electrophysiology, heart failure and Rhythm Management. In Electrophysiology, growth of 13% included contributions from 2 pulse field ablation catheter launches in the quarter. The launch of our Volt PFA catheter contributed to a growth of 14% in the U.S. and the launch of our [indiscernible] duo catheter helped drive mid-teens growth in Europe.

As we broaden the launch of both catheters, we expect growth in our electrophysiology business to accelerate. In Rhythm Management, sales grew 13%, making the third consecutive quarter that we have delivered double-digit growth and continued our track record of significantly outperforming the market. In heart failure, growth of 12% was driven by our market-leading portfolio of [indiscernible] devices, which offer treatment for chronic and temporary conditions. In Diabetes Care, continuous glucose monitoring sales were $2 billion and grew 7.5%. Growth in the quarter reflects an impact from a delay in the renewal process related to an international tender. We also saw the expected impact from a challenging comparison to last year. This comparison relates to shelf restocking dynamics that occurred in the first half of 2025, a topic that we discussed on our earnings call last year.

As we look forward to the second quarter, we expect CGM to return to double-digit growth. So in summary, our results in the quarter were in line with our expectations to start the year. We remain confident in our expectation for an acceleration in growth in the second half of the year, and we had clear visibility to the key drivers of that acceleration and are highly focused on executing on them.

Those drivers include, first, executing our growth strategy in Nutrition, which is underway and on track with our expectations. Second, we see a clear path to accelerating growth in both electrophysiology and core lab diagnostics supported by best-in-class portfolios, new product launches and improving market conditions. Third, we will continue our proven track record of delivering strong, sustainable performance in EPD and across our Medical Devices portfolio. And finally, we are successfully integrating Exact Sciences, which adds a compelling high-growth business to the Abbott portfolio for the strength and our ability to deliver long-term sustainable growth. I'll now turn over the call to Phil.

Thanks, Robert. As a result of the March 23rd close of our acquisition of Exact Sciences, our first quarter financial results include the results of the Exact Sciences business from the close date through the end of the quarter. As Mike mentioned, our press release issued this morning provides sales growth in the quarter on a comparable basis, which includes the full quarter sales of Exact Sciences in both the prior and current year.

To align with our reporting of comparable sales growth, our full year 2026 sales growth outlook of 6.5% to 7.5% is now on a comparable basis as well. The sales growth outlook includes the full year sales of Exact Sciences in both the prior and current year. Compared to our previous full year adjusted earnings per share guidance range midpoint of $5.68, our new guidance range midpoint of $5.48 reflects $0.20 of dilution related to the Exact Sciences acquisition, consistent with our assumption at the time of the announced transaction.

Turning to our first quarter results. Sales increased 3.7% on a comparable basis and adjusted earnings per share of $1.15 grew 6% compared to the prior year. Foreign exchange had a favorable year-over-year impact of 4% on first quarter sales. Earlier in the quarter, we saw the U.S. dollar weakened, 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 56.3% of sales. Adjusted R&D was 6.7% of sales, and adjusted SG&A was 29.3% of sales.

Based on current rates, we expect exchange to have a favorable impact of approximately 1% on full year reported sales. For the second quarter, we expect exchange to have a relatively neutral impact on sales. And for the second quarter, we forecast adjusted earnings per share of $1.25 to $1.31. With that, we'll now open the call for questions.

[Operator Instructions]

And our first question will come from David Roman from Goldman Sachs.

Maybe I'll start with just the updated guidance, and I know you touched on some of this during the call. But maybe you could just go into some further detail on, firstly, maybe just your guidance philosophy and your just thought process in establishing the revised outlook. And then secondly, just the extent to which the outlook is, in your mind, sort of fully derisks and captures upside potential, but also contemplates any downside unforeseen risks here?

Yes, sure. I think the philosophy here, David, is I think maybe there's a portion there that is -- we've included Exact Sciences into the history and our philosophy there has always been to ensure that our investors have a clear transparent detailed kind of breakdown of our performance. We did that during COVID if you remember, we always split out the COVID sales, we got feedback that they really wanted to understand underlying part of the business and the COVID part of the business. When we did the acquisition of St. Jude, the acquisition closed in the first quarter and so we did the same approach there to fold in St. Jude into a kind of more comparable basis. And we just think it provides the investors really the most relevant growth rate, a growth rate that is of the new Abbott portfolio on a very kind of clean apples-to-apples basis.

So I think that's the philosophy there. As it relates to the guidance, I think maybe the view there was just maybe a little bit of a -- I think a little bit of a conservative side here on some aspects that we felt in the first quarter. For example, if you look at the respiratory season, we forecast Q1 to be a relatively weak season compared to other seasons that we had seen in the past. And then that was even weaker than what we had forecasted. And I think as we've looked at other comparable health care businesses that we look at, like, for example, like OTC meds, which is a very good kind of triangulation there. We're seeing also those types of businesses have kind of this year-over-year effect there.

So one of the ways to think about it is like, okay, you have 2 parts in the year where you're going to have this effect. You have it at the beginning of the year and they have it at the end of the year. So one of the ways to think about it is, okay, we're going to make that lower respiratory season the back end of the year. And then we would have to assume that you would have an above-average respiratory season, at least from a testing perspective. But I'm only going to find that out just before Thanksgiving. So I just thought it was prudent to say we're not going to be able to make up or I'll put it this way. I'm not going to forecast that we're going to make it up in Q4 this respiratory aspect. That doesn't mean we won't be ready.

Obviously, you know our portfolio, and we know we've got the manufacturing capabilities and the distribution to be able to do that. I just decided that I didn't think it was prudent to to bake that into the forecast. The rest of the areas of the business, the sales growth out is very much in line with our January outlook. And if I go back to the way I described our year and the year progression, there's a couple of key kind of blocks that really drive our growth throughout the year.

I'd say the first block here is just, as I said in my comments, sustaining the growth of our medtech business and our pharma business. Medtech business, low double digits; our pharma business, above 7%. These are businesses that have consistently and reliably deliver this type of performance and whether it's market conditions or new product launches in these businesses, we feel very good about our ability to be able to sustain that kind of performance.

The other bucket, I would say, the second bucket would probably be more, okay, a trajectory changing businesses. And I would put diagnostics, especially our core lab business and Nutrition into those buckets. I think they're a little bit different, though, David. I would say on our Core Lab business, and we talked about this last year, the impact of China and the VBP and obviously, COVID, that was about a $1 billion headwind that we faced last year.

Other parts of the business, geography, other parts of the platform is doing very well growth, and we continue to see that. So what I've seen over the last 6 months really gives me confidence that we're actually on very much either on track or slightly ahead of that recovery in our diagnostics and that growth trajectory change. And I think the teams there have done an incredible job in China and especially here in the U.S., who, I think the team has done really good in terms of being able to capture market share.

The Nutrition transition, I think, is a little bit earlier on in that stage. But I still feel that what we're seeing right now, the decisions that we took, the timely decisions that we took in middle of Q4, I think we're starting to see some of that activity right now in terms of be able to drive volume growth. It's still early. I can't declare like, yes, it's done. But we're starting to see really good indications that the actions that we took and then combined with the new product launches that we're going to see that recovery.

And then the third bucket I would put on that list is just the integration of Exact Sciences, which adds a high-growth business to the portfolio. It's been performing very well. I'm sure we'll talk about that also. But I'd say those are the 3 kind of big drivers of our sales forecast and those really haven't changed. So the real thing here was just I'm not going to try and call what type of flu season we're going to have starting before Thanksgiving. So -- but if the flu season is as aggressive as we've seen in other years, then we have the manufacturing, we have the distribution, we have the sales force, all of that in place to be able to do that. So hopefully, that answers your question.

Our next question will come from Robbie Marcus from JPMorgan.

Robert, maybe to follow up on David's question. I appreciate that comparable growth is much more helpful metric, especially if we're looking out to the future and what the new Abbott will be doing on an underlying basis. But when I look at organic growth, which I think is what a lot of people pay attention to and the health of the Abbott business coming into the year before the acquisition, it looks to me like growth is moving from the 6.5% to 7.5% guide. On the fourth quarter call, it's something more like 5.75% to 6.75% if we adjust out Exact Sciences and the lost royalty revenue. So it does look like there's a bit of deceleration in the prior organic Abbott business. How are you thinking about managing that? How much is onetime versus sustainable and where do you see sort of the biggest pressure points and how you're addressing it? Appreciate it.

Yes. I'm not sure I followed those numbers though, Robbie. But I think what you're trying to get to is, hey, by putting Exact Sciences into a comparable basis -- are there parts of the non exact business that are underperforming. I'm assuming that's -- what you're trying to hint around. I would say, as I said to David, I think that if I'll put it this way. If the business acquisition had closed after this call, let's call it, Q2, sometime in Q2, I think we probably would have done, I think what you, in the medtech space. We usually expect is that you kind of keep it separate and then you kind of lap for the year. But then what you'll then ask me to do is to always every quarter reconcile between what the acquisition did to the organic growth rate.

So I just felt that because it was early in the Q1 before this call, that we could roll it in on a comparable basis and that would give our investors full visibility to the new Abbott with this addition of Exact Sciences. And so I don't think -- I know that might involve a little bit more work for some of you guys in terms of your modeling, all of that. But I think we try to make it very easy for you as part of our disclosures. Parts of the business that we're focusing on. I think I went through that in a fair amount of detail here.

I mean if you want to go to specific kind of parts of the portfolio we can do, but I think I described that to David pretty clear here. I think the -- but I'll repeat it, if necessary. The device portfolio, the pharma portfolio, we still feel very strong about those growth rates. We're not backing off those. Obviously, there's opportunities to outperform in some of them. There are some more kind of challenging areas in others, whether it's market, whether it's competition, but overall, that combination, we feel very good about sustaining that. And then these trajectory changing businesses, like we've discussed in Diagnostics and core nutrition, I think we know what the issues were. We know what we're working on, and we're really focused on executing that. But if I take a step back here, I mean, I think ultimately, the way our business is, we're a very diversified company. We lay out all of the different businesses. We break out even within sectors, we break them out and be able to show the performance in that.

My view here is that, yes, it would be great to have every single business beating all The Street expectations. Unfortunately, sometimes you're not going to have that. I'm not going to say that never happens because it's happened before, but sometimes it doesn't happen. And I think the important thing there, Robbie, is that you have a collection of businesses that we feel are very attractive and that the combination that some of them are able to hit our commitments and deliver on our financial commitments. So I take a view of -- I look at each business individually, but we also look at it as a whole. And I think as a whole to the company is well set up for this year.

And our next question will come from Larry Biegelsen from Wells Fargo.

So Robert, I wanted to ask about CGM. We heard your comments about the CGM market or your business in Q1 and the expected acceleration in Q2, but the CGM prescription trends in the U.S. look weak. Can you talk about what's happening in the CGM market? There's a concern that the current indications are saturated. How are you thinking about Libre growth the rest of the year and longer term? And just lastly, remind us of the timing for type 2 non-insulin and the dual [ ketone ] sensor and the lactate sensor you mentioned?

Sure. Listen, I think it's always important to look at weekly prescription data in 1 country. It's an important country. And the weekly prescription data is obviously great early indicators for the market, even though that auditing channel that you guys rely on to look at weekly prescription data doesn't capture the entire market. It's very different from pharma, where you've got a lot of other segments of the market that are performing. So I think using TRx data to ultimately look at how the market is evolving and only using that is, I would say -- I'd caution -- I think it's a little bit myopic. So let me take a kind of a bigger view here, okay, Larry in terms of how I think about the market, what's going on in the market and the opportunities we have there.

I'm very bullish on this mark. If I look at the big picture here, I'm very bullish on the CGM market. As you know, Larry, I've always been, and I continue to be. If I look at our assessment of the amount of people that should be on a CGM on a global basis, we estimate between 70 million to 80 million people on CGMs -- should be. And obviously, there are different types of patients in that number, but overall, 70 million to 80 million people.

I think the market today is around 10 million to 12 million. So 10 million to 12 million people. And again, you might think 70 million, 80 million is a lot, but there's about 0.5 billion people with diabetes. So I felt that I've kind of narrowed it down quite a bit already.

And even in that narrowed down world, we're still very under-penetrated. And I think if you look back to -- I'll speak for our growth trajectory because we've looked at this, and we continue to look at it. I go back like 15 years, I look at quarterly revenue over 15 years. So let's call it, whatever, 60 data points there. It's never always up to the right on a perfect 45-degree, okay? I know we love businesses that are like that, but it never is. There are periods, if you look -- at least for us, there are periods where there's a little bit of modest growth and modest growth, I'd call like whatever is 8% to 10%. And then it's followed by very long periods of strong, strong acceleration, teens, 20% kind of growth. And if you look at those acceleration periods, they're typically driven by different types of catalysts, either a reimbursement catalyst, a geographic expansion catalyst, a new product launch catalyst. And as I look at this market and I look at our position, I feel a lot of catalysts still ahead of us in this market. If I think about reimbursement as a strong catalyst, you just mentioned one.

[indiscernible] type 2 non-insulin coverage. I expect proposed language of that coming soon. I can't tell you the exact month, Larry. And I'm not going to try and forecast what it is, when it is, but I know it's going to happen. And I know that it's going to add close to 10 million people that don't have coverage now that now will be able to have coverage. And that's obviously going to accelerate commercial coverage, too. So I think that's one that we talked about. I have not included in my guidance. But it is a sweet spot for us in terms of our -- the channel -- our channel strength, our promotional strength reimbursement coverage there.

So I think that's a count that's on the horizon here for us. Internationally, I know we like to focus a lot on the U.S. but internationally, out of the top 10 markets in the world, only 4 have actually gone full-blown basal coverage. So there are another 6 very large markets that are still in the process of not evaluating, but going through the budget process, the criteria process, et cetera. And what we've tried to do is obviously build evidence to be able to support that movement, not only from a physician side, but also from a patient advocacy. We showed an RCT, I talked about in opening comments at ATTD conference later this year, which showed, again, in a randomized controlled trial, not just using real-world evidence, but randomized controlled trial that patients on basal do better with Libre. So I look at those -- and there is so much opportunity still internationally and even in the U.S. So I don't think that the patient TAM is tapped or anything like that.

You're just going to have these little moments where growth modulates a little bit and then the next catalysts come in and they continue [ to drop ], you have to look at the bigger picture, which is you've got 70 million to 80 million people that can be on this product. And even if you look at a yearly revenue number that's lower than what we're seeing today because you've got different types of patient groups in that number, you're looking at $30 billion, $35 billion TAM here that's available to us. And we're focused on that, Larry. We're focused on building a competitive advantage to be able to be a leader in that space, whether it's product technology advantage, cost advantage, scale advantage. And we do very well there.

And then if you think about kind of innovation as another catalyst, we have a couple that are on our way also for us, too. We've got still committed to an expected approval of our dual analyte system in the second half of this year. That's going to open up about 1 million patients that we previously had very little access to on the pump side. You're going to have about 5 million SGLT2 users that aren't using the product, which will now have the benefit of having consumers ketone monitoring. We're working on a Libre 5.

I'm not going to get ahead of myself here. But our view here is always, okay, how do we continue to sustain our competitive advantage and you do that through cost advantage and you do that through product innovation. So I still feel very good about this market. And I'm looking at it from a much bigger picture than just weekly TRxs, which don't get me wrong. We look at it also, and we can see the trends, too, and there are obviously areas that we can do better, and we're working on that, too. But bigger picture here is that we're very well positioned for what I believe is a very, very large kind of market.

Our next question will come from Vijay Kumar from Evercore ISI.

I guess maybe I'll stick to Exact. Given that the deal is closed. This is an asset which has done phenomenally well over the years, doing mid-teens kind of growth. Just talk about your plans for sustaining strong growth of Cologuard. Is there an international angle here for Cologuard? And sort of related to that [indiscernible], when I look at guidance. Comparable growth is now 6.5% to 7.5%, and we know Exact has grown faster. Is there some conservatism that's being perhaps being baked in the guidance? Could there be upside given Exact is growing faster?

Sure. Listen, I think the integration is going very well. So I think it starts with that, right? We've named Jay Corbel, our new leader in that business. He previously led the screening business of the Cologuard business, and he's reporting directly to me. It's reported in our diagnostics kind of queue, but operating stand-alone and a report straight to me. I think right now, we're very excited, and I know that the team is also very excited have had opportunities to feel travel with the reps, I've got opportunities to talk to physicians. And I'd say I'm very bullish about the ability to really accelerate this business.

Sustaining Cologuard growth. I'll answer that, but let me just say, when we looked at this strategically, Vijay, we really wanted to think about this not as a 1 product kind of deal, but more as an opportunity to enter a space that is extremely exciting and very high growth. So not just screening with Cologuard, but therapy selection and MRD testing. These are obviously areas that I know you know very well and they have great opportunities here.

So our goal in doing this is to actually be across the entire cancer diagnostics ban, and we believe that exact was definitely kind of a beachhead building block for us to do that. And within that, obviously, Cologuard is the key growth driver there. And I would say, I think it's a very sustainable growth here for us for a couple of reasons. One, the demand is still going to -- is high and it's continued to increase, right? So right now, if you look at it's very under-penetrated right now. You've got 50 million Americans that are not up to date with our CRC screening. So there's an opportunity here in the U.S. but internationally also, this is very, very under -- like very under-penetrated, Vijay. And one of the things that we bring is established regulatory KOL, health care system distribution relationships across a lot of markets.

So we've already set aside a group that's really going to focus on how do we develop the screening and the cancer testing market in these international markets. And then if you look at guiding -- screening guidelines, I mean, the age in '20 -- I think it was 2021 was lowered from 50 to 45. That added a lot of new patients.

What I'm seeing, and I think it's more than anecdotal. I've seen studies now that we're seeing people like at 30 and 35 be diagnosed with like stage 3 and so that's not good, obviously. So could I eventually see that being lowered from 45 down to 40. I think I can see that happening because there is a medical need for that, and that would add another 20 million people just in the U.S. So I think the demand is there. The piece of the Cologuard, which is an incredible value proposition is that with this increasing demand for screening, there's only a -- [indiscernible] colonoscopy capacity, at least in this country. It really hasn't changed. It's been $6 million per year and pretty consistently.

And if you factor in that there -- if you look at gastroenterologists and look at the enrollment rates in medical schools are coming down, so you can see a world where going to have increased demand for screening and less supply to be able to do that from a colonoscope perspective. And Cologuard does really well here, not only is it convenient at-home, but its sensitivity at 95% is equivalent to colonoscopy.

So I think the combination of the -- the increased demand followed by this bottleneck. If you look right now, I think in the U.S., I was talking to the team average wait time for colonoscopies is between 3 to 9 months, depending on the state. So it's already -- there's already a backlog. So I think the demand and the value proposition of Cologuard is very strong. And if I add a third part there, I think what the team at Exact Sciences has built is pretty unique. So you've got a 1,000-person sales force calling on primary care reps, and it takes time to build that.

It's not an easy thing. And you've got 200,000 health care professionals prescribing every quarter, Cologuard. And they have this incredible system where everything is integrated. It's integrated into the health care records, it's integrated into your phone. I mean it's a very seamless experience. And I think that's pretty unique. I think the other part that is unique to us is that rescreens are becoming a very strong growth contributor. 25% Of our tests today are rescreens and you're eligible for a rescreen every 3 years.

When you've got all the data, you can obviously interact with your customers to remind them. And what I saw on the data was that you've got a very high rescreen rate, and it gets even higher as the rescreens kind of progress. So I think right now, we're seeing about 500,000 patients per year just for rescreens.

So I think that, that's something that's very unique to this business for us because they've been doing it for 10 years. So you've got this rescreen business that keeps on going. And then the third thing, which I think is also very unique to us and what's been built is these care gap programs, which I know you know very well also, CRC screening is one of the quality metrics that CMS uses for star ratings. And payers and providers, they get 3x this quality score for Cologuard versus a FIT test.

So we're seeing a lot of interest from health care systems and providers to stay ahead and ensure that they're scoring their quality metric points. So I think those 3 things are pretty unique. And I add that with a combination of the demand, the opportunity to international. So I feel very good about our ability to kind of sustain this growth. Now internationally, is it going to be Cologuard. It could be in some markets, it could be other tests for other markets, but there's clearly your need here.

I travel to Asia, I travel to Europe in this first quarter, and I spoke to health ministers and top 3 things that we walked away from was they want to get cancer screening up and going in their countries. They see it as a problem, and they see Abbott as one of those solutions. So I feel very good about this business and the integration is going very well. I couldn't have asked for a better integration. Culturally, I think both companies are very compatible, very focused on the patient and on innovation and driving growth. So we feel good about it.

Our next question will come from Matthew Taylor from Jefferies.

I was hoping that you could talk a little bit about the trends in structural heart. And maybe within that, just to address what's going on in left atrial appendage closure. Not only do you have programs including the NextGen 360, which I think people are excited about, but I was hoping if you could comment on what you think the impact could be from the CHAMPION study from your competitor, and you have a similar study catalyst that will read out here in a year or two, but would love kind of an overview of structural heart and LAAC.

Yes. So I think that's an interesting question because I think historically, what we've done is we've had left atrial appendage closure device within our structural heart business and what we decided to do is to move it outside of our structural heart business and put it into our electrophysiology business. And we did that in end of last year and beginning -- starting January 1 where we moved the sales force, clinical teams and eventually move manufacturing, et cetera, over.

And we did that just because we felt that this would be beneficial for our electrophysiology business, but quite frankly, it would be more beneficial for our structural heart business. So I'll focus on the structural heart business and the trends there. Listen, I think we've been doing pretty well with this business. So when you look at the -- I think in our Q, we've got a reconciliation of the impact of moving those sales out of Structural Heart into EP.

So that's a big contributor to the disconnection between The Street model and what we delivered. But on top of that, we have seen some competitive intensity increase here in the the mitral space as one of our main competitors here has kind of expanded their portfolio. So yes, I think my team can do a better job there. They know that also. We need to improve our execution in the U.S. We've done some changes to leadership. And I'm expecting our U.S. commercial team here to respond to the challenge. Internationally, growth continues to be very, very strong across the entire portfolio and we're delivering double-digit growth in mitral and TriClip, in our structural interventions business. So I think that's going very well. And while there's going to be some geographic differences there, Matt, and I think that geographic difference might persist for a little bit. I continue to expect our structural heart growth here to be high single digit for the full year. So I feel good about the structural heart portfolio.

There are areas that we got to do better in. I kind of highlighted the product and the geography. So -- and I'm expecting the team to really respond here. I think the business is doing very well. And then as I said in my opening comments, we've got a couple of trial readouts, as you mentioned, we completed enrollment in our catalyst. I don't have a big reaction to my competitor's trial. I'm going to let them as I'm assuming they probably have done -- talked about it. So I'm going to wait until ours comes out, and then I'll comment on ours. But I think it's a high-growth, attractive business.

I think you -- you mentioned our next-generation product. I think it is a very, very exciting product for us. And that's why we thought that moving it over to our EP business would actually provide a better acceleration for that product per se and then actually allow our structural heart team to be more focused on kind of valvular valvular products and selling and keep them more focused.

Our next question will come from Travis Steed from BofA Securities.

Wanted to ask on the Nutrition business. And I heard you mention that volume is starting to recover. But any other color you can give on giving confidence in that business returning to growth in the back half and volume picking up? And then -- and how you're thinking about ongoing portfolio management and value creation and how nutrition fits in that strategic thinking?

Yes, sure. Like I said in my comments and in a couple of the early questions, I think we're starting to see that impact. we did a pretty comprehensive price assessment, not just at a product level, but a geographic level. We evaluated our gaps versus our competition. So we didn't reduce prices just basically uniformly across the portfolio, Travis. We kept it very focused on the products that we believe and based on our experience would demonstrate this positive volume response to a reduced price.

So when the price is passed on to the consumer, we're seeing this kind of immediate effect. But it takes time for some of that price to get passed on to the consumer, right? Because you've got inventory in the channel, et cetera. So it doesn't -- so that price reset to the consumer doesn't happen overnight, which is why because we know that we wanted to get ahead of it as quickly as possible, which is why we did it in Q4 of last year. But when we lower -- when you see the lower prices get passed through the consumer, you're seeing the intended effect. So if you look, for example, that our U.S. adult nutrition business, specifically on [indiscernible]. That was a product that we knew had some elasticity and its price just based on our experience, we've seen volume grow across all the retailers that have actually passed that on here in the U.S., pass that on to the consumer. So you're seeing that increase in volume, and we kind of use the 2025 as kind of the baseline. Obviously not Q4, but at least the first half of the year is the baseline. So we're tracking this on a monthly basis. I know my team looked at this on a weekly basis with the data that's available.

So I feel good about where we are right now. I mean I'm not going to say right now that it's all done and let's just let time pass and then it will all come through. There's work we've got to do. There are product launches that also allow us to gain distribution. There's work that we need to do in terms of expanding distribution into the distribution channel.

So there's a lot of work going on right now, but the team is incredibly focused. And I think this is a team that's been pretty resilient Travis and does pretty well -- at least has shown to do pretty well when it counted some of these challenges, they are able to bounce back pretty quickly. So right now, I'd say on track, encouraging early signs, but still work to do. As it relates to the portfolio.

Listen, I like the diversity of our business model and the diversity is not just across business segments, it's across products. It's the diversity in our geography, it's diversity in our customer base and different payer types and different innovation cycles. We don't want to be so heavily weighted on 1 or 2 products that the company has kind of driven there.

And I think that diversity really provides us a pretty unique perspective on the global health care system. That being said, Travis, we're constantly looking at our portfolio, we're constantly looking at are there -- is the market still attractive? How is our competitive position that we can determine. Do we expand, do we maintain? Do you potentially reduce? And we do this on an ongoing basis with management, and we do it with our Board at least once a year, sometimes twice a year. So this is evaluating our portfolio for value creation is not like a once every 5-year exercise. We're constantly doing it. And I think I'd tell you if we see an opportunity, we've demonstrated that we can act upon it. So right now, my focus here is I'm never going to make a long-term strategic decision based on kind of near-term challenges. Obviously, Nutrition is going through some near-term challenges and going through some transition and recovery phase, and that's what my focus is on -- is on getting our business back to a growth rate that we had seen over the last kind of 4 or 5 years. But the idea of constantly evaluating the portfolio that is something that we do for all businesses in the company and we do it on a pretty disciplined basis.

Our next question will come from Joanne Wuensch from Citi.

I'm sort of surprised for 50 minutes into this and no one's asked about macro issues. So I'm going to go there. I'm curious what you're seeing in terms of the potential impacts for the conflict in the Middle East on your business on oil and resin costs, but also just a big picture of what you're seeing in terms of patient volumes and reimbursement and outside of your comments under respiratory no dates and things like that.

Sure. Listen, we're -- the way Abbott has been built, it's been built to withstand withstand these kind of events. And our discipline here is to ensure that we try and get ahead of it. As it relates to oil costs, I mean I think that's an impact that it's too early to tell. We're not seeing any of that in our cost right now. We're not seeing freight rates increase from our suppliers right now. But we're monitoring it, and we have a whole team that monitors and stays close to it.

I think one of the things that we do to stay ahead of this, Joanne, is that each one of our business has dedicated teams Monday through Friday, 08:00 a.m. to 06:00 p.m., what they do is they work on gross margin improvement, what are ways that we can do to be able to anticipate cost shocks, to look at ways that we can be more efficient, more effective, look at ways at how we can negotiate with our suppliers. And so I don't -- I look at the cost element of the conflict right now, it's too early to tell, but I'm not saying that I think that there is a big impact because I think that we've got teams in place that are working hard to kind of mitigate.

The impact that we saw in Q1 was very minimal, Joanne, but I wouldn't call it a demand impact. I would call it more of a getting product into the region kind of impact. As you can imagine, shipping lanes became -- everybody wanted kind of spots on planes and all different types of supply and transport methodology. So that's just something that we got to kind of stay ahead of. One of the things -- the reason we felt a little bit of impact is what we run pretty efficiently with our inventory.

So now we need to make sure that we've got [indiscernible] more inventory, at least in our affiliates that we have warehouses in the areas, so that we have enough product that so we don't have any kind of back orders. But I didn't see drop-off or demand or reimbursement challenges or issues as a result of the conflict. For us, it was more just ensuring that we could get product into the area. So -- and we're highly focused on that. And -- but as you can imagine, the teams that Abbott has in this region, Joanne.

I mean they've -- unfortunately, they have been through a lot and seen a lot. And I give them a lot of credit because while we focus on kind of growing the business and driving the business. They've got to do that under some very, very tough challenges. So I give a lot of kudos to the work that they've been doing.

And our next question will come from Josh Jennings from TD Cowen.

Robert, I'm hoping to get some more details on the EP franchise and the Volt launch internationally and now in the U.S. Internationally, any quantification of how Volt is impacting share recapture in the ablation catheter segment for the U.S., just with the early approval of -- I guess, Volt 2.0. Any updates just in terms of the timing or just how your team is going to move forward into a full launch this year. And then overall, maybe just help us think about Abbott's updated views on just EP market growth volumes, pricing, if you would.

Yes. Sure. Well, that's 55 minutes with that -- with the first EP question. So listen, I think the team has done an incredible job over these past years here of driving double-digit growth during a window where we didn't have PFA, that window is now closed. So obviously, we naturally have expectations and outlooks here that are on the rise. The U.S. launch of Volt and the European launch of [indiscernible] are on the way. And both these launches are in what we call like limited market release phase. We do that with all of our products. It's just part of our -- it's part of our process, whether it's in [indiscernible], whether it's in diagnostics. What we want to do is before we go to full blown, we believe there's an intermediate step between what I would believe to be a little bit more of a controlled environment or a clinical trial before going full blown. So -- and that helps us.

It helps us understand resourcing. It helps us understand positioning. It helps us, quite frankly, uncover insights that you might not get during a clinical trial. The feedback we're getting from both these products is extremely favorable and positive and very much aligns to least our expectation that we did when we were building this portfolio 2 years ago. Remember, a lot of questions of, hey, we were late. And we said, okay, we realized we're not first, but we want to take advantage of -- we want to take advantage of our mapping systems and develop what we believe was going to be an upgrade to the first generation. I think we're seeing that with Volt. I think like the conscious sedation aspect of Volt is extremely valuable, more so now as in the U.S., but even internationally. And that's something that's specific to Volt in terms of how we design that. And I think if you paid attention to the European Heart Rhythm meeting that occurred last week. I think you saw also, albeit preliminary and may be small, but this idea that the lesions that Volt creates are more durable.

And I think ultimately, that repositions, I think, or at least balances the discussion on the EP market to be, yes, we want more efficiency. We want more speed in these procedures because you've got so many patients that you can treat but we want to also figure out how to do better outcomes and how to improve patient outcomes. And I think that that's what we're believe that Volt can do is to actually deliver on the promise of speed, efficiency, but also an ability to deliver better outcomes. I think the TACTiflex feedback that we're seeing, Josh, is very positive also easy to use, very fast lesion creations. This is on the Tactiflex chassis. So there's a lot of experience with that catheter, pretty seamless switch between RF to PFA. So all very positive. So I think the combination of that great feedback and now us starting to move to broaden the launch is going to give us a lot of confidence here in the growth rate to accelerate.

And I think that includes growing faster -- growing faster than the market by the exit of this year. To your comment, I mean, I know there's a lot of debate about what is it? Is it 15? Is it 20? we think the market is going to be in the mid- to high teens. We're shooting to do better than that. So I think there's an acceleration here. So the near-term outlook, I think, for the business looks really strong. But I think more importantly here, Josh, is I like our position long term also. You've got 2 new PFA catheters, you've got a new ice catheter, you got a new introducer. We're constantly making upgrades -- annual upgrades to our mapping system.

You have the mapping infrastructure in place with the clinical specialists a highly valuable asset to our customers to have that. And then on top of that, we're now going to be adding a second generation LAA device to this group I think that no company in this space has got the kind of portfolio that we have and the completeness of the portfolio that we have and the experience and the field teams, et cetera. So -- and I know this is not a product that specifically falls into EP as a reportable segment, but we have a lot of VPs that are also using devices, pacemakers, ICDs and then you add on our leadless technology, which is very fast growing. I think we have a very, very differentiated EP product portfolio. And so I think there are a lot of exciting times in the horizon here for our EP business.

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

And our final question will come from Marie Thibault from BTIG.

I just want to get a little bit closer to understanding what's going on in the core lab business. I think you've called out strength in the U.S., Europe and Latin America, I think we're moving past some of the China VBP headwind. So wondering if you can just characterize the Core Lab trajectory by geography during Q1. Any share gains, any notable product launches, things like that to call out?

Yes, sure. I think you kind of characterized it well. I mean, I think our sales in China for Core Lab were flat in Q1. If you think about what they were in last year, we were between 50% and 30% down every quarter. So I think the teams here are making good progress. We're lapping obviously some of the price and the volume headwinds. So that's also a contributor there. So I think the market dynamics that we faced kind of has kind of China. I'm cautious to say like it's all lapped because as we know in these VPs, you've got different kind of phases. You've got regionals, you've got nationals and all of that. But I think the impact here is we've got China modeled in at a single-digit decline for the year. could we do better than that? It seems like the team has done better than that in the first quarter, and I'm hoping they'll be able to do that.

I think if I move to the U.S., I think, as I said in the previous question, I think the U.S. team has done a fantastic job and the growth rates there are all in the high single digits, than they've been like that for some time. So we're clearly having an ability to take -- to renew our contracts at a very high renewal rate, so call it, 90-plus and share gains are now accelerating. So our win rates, I would call 55 plus. So every business that we're up in new business, we're able to win 1 out of 2. So that's a good trajectory over here. Europe, it's difficult to characterize as 1 big Europe because as you probably know, you've got different situations between North and South. But in general, that business has been doing mid- to high single digits pretty reliably.

So we feel very good about the diagnostic business. It has been performing well all but the impact of VBP in China, and that seems to be lapping. So I expect to be getting -- the full year for our core lab business is kind of in that mid-single-digit growth rate. I'll talk to the leader of that business yesterday, they've got a plan and some strategies that probably they could do better than that. But obviously, the second half is higher than that, and it falls into what we've historically been doing. And like I said, I think the team has done a very good job there at navigating PBP in China and continue to drive growth in any other parts of the business. So I think that's gone very well. Paying attention for us in China, about 80% of our portfolio has gone through I think you'll probably hear about new ways of EDP, like a fertility VBP, a cancer VBP. And so we have very little share in those segments. So I think I don't want to say we're past the eye of the hurricane here, but it seems like the teams have been able to kind of stabilize China, and then the other businesses continue to perform the way they've historically been performing.

So just before we end the call, I'd like just to reiterate my comments that I've made at the end of my prepared remarks, I remain very confident in our expectation here for an acceleration in growth in the second half. Like I said earlier, we know what the drivers are. We know where the accelerations are. We know where areas that we need to improve our execution on and we are just laser highly focused on executing on them. So with that, I'm going to wrap up, and thank you all for joining us today.

Thank you, operator. Thank you all for your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11:00 a.m. Central Time today on our website at abbott.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.

Good morning, and thank you for standing by. Welcome to Abbott's Fourth Quarter 2025 Earnings Conference Call.

[Operator Instructions]

This call is being recorded by Abbott. 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. It cannot be recorded or rebroadcast without Abbott's expressed written permission. I would now like to introduce Mr. Mike Comilla, Vice President, Investor Relations.

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Phil Boudreau, Executive Vice President, 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 results for 2026. 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, 2024.

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 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 reasonable certainty and without unreasonable effort, the timing and impact of certain items, which could significantly impact Abbott's 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.

Thanks, Mike. Good morning, everyone, and thank you for joining us. Before discussing our fourth quarter results, I want to take a moment to reflect on 2025, a year that demonstrated Abbott's leadership and innovation, disciplined execution and strategic actions taken to position the company for sustainable long-term growth. Innovation continues to be the foundation of our success. In 2025, we achieved several important milestones that strengthen our position for the future, including regulatory approvals for our Volt and TactiFlex Duo PFA products, a new indication for Navitor TAVR valve CMS national coverage for TriClip and CarioMEMS, completing enrollment in our pivotal trial to bring a new LAA device to market, filing for FDA approval for our dual glucose ketone sensor initiating the pivotal trial of our coronary IVL device starting to launch sequence in EPD to bring biosimilars to emerging markets and recently started the launch sequence in Nutrition to bring new products to market that meet evolving consumer preferences.

2025 was also a year of disciplined execution. We delivered top-tier margin expansion and achieved our original target of double-digit earnings growth in earnings per share despite the implementation of new tariffs and heightened market challenges in China. Finally, in 2025, we made important strategic moves to shape Abbott's future. Our announced acquisition of Exact Sciences will allow Abbott to enter and lead in the fast-growing cancer diagnostics market and adds a new high-growth business with an attractive pipeline to the Abbott portfolio. We expect 2026 to be another year powered by innovation, operational excellence and strategic execution. As we announced this morning, we forecast the midpoint of our 2026 organic sales growth range to be 7% and the midpoint of our adjusted earnings per share range to reflect 10% growth.

I'll now summarize the fourth quarter results in more detail. I'll start with Nutrition, where sales declined in the quarter. Abbott has been in Nutrition business for more than 60 years. And with that history comes experience, not just in times of growth, but in times that require navigating challenges. And as I mentioned last quarter, the U.S. pediatric business is seeing an impact from market share loss, partly due to the loss of a large weight contract last year, but our results this quarter underscore a broader challenge, which is the need to reignite volume growth, a challenge many consumer goods businesses face today.

Over the last several years, we've seen manufacturing costs in nutrition rise, in part due to a post-pandemic driven surge in commodity costs that remains in our cost base today. We've increased prices to help mitigate the impact of higher manufacturing costs, but those price increases in the current economic environment have become a factor in constraining volume growth. Many consumer good businesses are facing this dynamic. Higher manufacturing costs led to higher prices, which in turn are suppressing demand as consumers become increasingly more price sensitive. Path is not sustainable long term so we began to make changes in the fourth quarter. Our goal is to transition our business back to one with a more balanced growth profile with volume growth playing a greater role going forward. In the fourth quarter, we began implementing price and promotion initiatives to help start the process of reigniting volume growth.

To further drive volume growth, we are increasing our focus on innovation, which is an area that was deprioritized for the last few years given the necessary heavy focus on production and supply chain management in this business. Following the launch of 2 new versions of Insure late last year, we expect to launch at least 8 new products over the course of the next 12 months. We expect performance in the Nutrition to remain challenged in the first half of the year with a return to growth in the second half. While this transition back to a more sustainable, volume-driven business as consequences on our near-term results. These are the right steps to take to better position the business for long-term success.

Moving to Diagnostics, where sales declined 3.5% due to the anticipated year-over-year decline in COVID testing sales. Core Lab Diagnostics grew 3.5%, achieving a third consecutive quarter of accelerating growth and building steady momentum as we enter 2026. For the full year, excluding China, growth in Core Lab Diagnostics was 7%, reflecting durable demand in markets around the world. In [ Point of Care ] Diagnostics, sales grew 7% in the quarter, driven by adoption of our high sensitivity troponin test, which allows for earlier and more accurate detection of heart attack.

Turning to EPD where sales increased 7% in the quarter. Growth was well balanced across the markets and therapeutic areas that we participate in, including double-digit growth in India and several countries across Latin America and the Middle East. By focusing on high-demand therapies in faster-growing markets, EPD delivered its fifth consecutive year of sales growth exceeding 7%. And I'll wrap up with Medical Devices, where sales grew 10.5%. In Diabetes Care, sales of continuous glucose monitors grew 12% in the fourth quarter and 17% for the year with sales in 2025 exceeding $7.5 billion. This marks the third consecutive year that our CGM sales have grown by more than $1 billion. Our success in CGM continues to be driven by strong underlying market fundamentals, a leading position in cost and scale and an unwavering commitment for market-leading innovation. These factors have led to a continued increase in adoption across all of the various use groups.

In Electrophysiology, sales grew double digits in the U.S. and internationally. In December, we announced FDA approval of our Volt PFA catheter, which represents our first PFA product offering in the United States. And earlier this week, we announced that we obtained CE Mark for our new TactiFlex Duo ablation catheter, which offers both RF and PFA energy to treat patients battling AFib. In structural heart, growth was driven by double-digit growth in Navitor double-digit growth in TriClip, double-digit growth in MitraClip. In the coming weeks, we'll achieve an important milestone by completing enrollment in our CATALYST trial. This trial is evaluating the performance of Amulet left atrial appendage device compared to oral anticoagulants in patients with AFib. This trial is designed to generate the evidence to demonstrate the clinical benefits of Amulet, which could lead to broader adoption and expansion of the addressable market.

In heart failure, growth of 12% was driven by growth across our market-leading portfolio of ventricular assist devices, which offer treatment for chronic and temporary conditions and growth in CardioMEMS, our implantable sensor used for the early detection of heart failure. Our investment strategy in Medical Devices is based upon a two-pronged approach. We invest to sustain strong performance in high-growth segments like diabetes, structural heart, electrophysiology and heart failure, and we invest to increase the growth outlook in more foundational segments like Rhythm Management and Vascular. While the investments in traditionally high-growth segments tend to get more attention, the investments we've made in our foundational businesses are generating very impressive returns.

In Rhythm Management, growth of 12% was led by continued strong uptake of our leadless pacemaker of air. For the full year, growth of 10% in Rhythm Management represents the third consecutive year of significantly outperforming the market with AVEIR and the investments we're making in conduction system pacing and other novel technologies, we see the $10 billion ribbon management market as a great opportunity to capture market share and drive sustainable growth for years to come. In Vascular, growth of 6.5% was led by double-digit growth in vessel closure products and growth from spree are below the knee resorbable spend. For the full year, Vascular sales grew 5% making this the second consecutive year of Vascular has delivered mid-single-digit growth. With the expected approval of our coronary IVL device next year, we expect growth in Vascular to follow a similar pattern of acceleration that we've seen in Rhythm Management.

And lastly, a neuromodulation growth of 5.5% was led by strong international growth to return our rechargeable spinal cord stimulation device. So in summary, despite facing some challenges in 2025, we achieved our original target of double-digit earnings per share growth. Our new product pipeline continues to be highly productive, and combined with the strategic steps we took to shape the company for the future, we're well positioned for accelerating growth in 2026. I'll now turn over the call to Phil.

Thanks, Robert. As Mike mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis.

Turning to our fourth quarter results. Sales increased 3.8% when excluding [indiscernible] testing sales. Adjusted earnings per share of $1.50 reflects growth of 12% compared to the prior year. Foreign exchange had a favorable year-over-year impact of 1.4% on fourth quarter sales, which was in line with our expectations at the time of our earnings call in October. Regarding other aspects of the P&L, the adjusted gross margin profile was 57.1% of sales, which despite the impact of tariffs, increased 20 basis points compared to the prior year. Adjusted R&D was 6.2% of sales and adjusted SG&A was 25.1% of sales. Adjusted operating margin was 25.8% of sales, which reflects an increase of 150 basis points compared to the prior year.

Turning to our outlook for 2026. Today, we issued guidance for full year adjusted earnings per share of $5.55 to $5.80, which reflects 10% growth at the midpoint of the range and contemplates an adjusted earnings per share forecast of $1.12 to $1.18 for the first quarter. For the year, we forecast organic sales growth to be in the range of 6.5% to 7.5%. Based on current rates, we expect exchange to have a favorable impact of around 1% on full year reported sales, which includes an expected favorable impact around 3% on first quarter reported sales and we forecast our adjusted tax rate to be in the range of 15% to 16%. With that, we'll now open the call for questions.

[Operator Instructions]

And our first question will come from Larry Biegelsen from Wells Fargo.

So Robert, on the last call, you seem comfortable with consensus revenue growth, but you're guiding a little bit lower today. I assume that's related to Nutrition. Can you talk about what's changed since the last call? And how you're thinking about the year playing out from a cadence standpoint? I assume you would expect growth to accelerate through the year, given your comments on Nutrition and some of the launches. I'll leave it at that.

Thanks, Larry. I think if I remember you, you're the one who asked that question back in October. And when I -- when we when I answered that question, I think consensus was 7.5% top line. EPS was 10%. So today, we guided the midpoint at 7% on top line, 10% on the bottom. So midpoint here is 0.5% lower than what was consensus. But other than that, nothing has really changed. The EPS is in line with consensus, expecting healthy margin expansions. I'm sure we're going to talk a lot about the pipeline, which is either on target or ahead of schedule in certain products, balance sheet's in great shape, feel good about us closing Exact. So the 0.5 point change on the top line, as you pointed out, is really the -- the change in the near-term outlook, I'd say, of our Nutrition business.

You saw in our quarter in our Q4, we had a negative quarter. And as I said in my comments, there's a component of this business, it's a health care driven product portfolio, but there's a component of it, a dynamic of it that is very much aligned with consumer packaged goods. And I'd say the challenges that CPG businesses have been facing are pretty well known following pandemic, pretty significant surge in costs between 2022 and 2024 to offset that. I think we all went ahead and tried to mitigate it with price increases that obviously drove top line, but more importantly, I would say, improved or didn't allow the economics and the profitability of the businesses to deteriorate.

If you look at our profitability in that business, 2024, 2025, where it was back in 2022, it had that impact. But the higher prices that have resulted now in what I see is kind of suppressing demand and lowering the volume growth and the pressure on the volume growth accelerated, I'd say, as we move throughout Q4 and consumers became increasingly more price sensitive. So as I said in my comment, it's not a sustainable path. You'll get down into the spiral if you keep increasing prices, you'll keep on driving volume down. So we could have could -- we could have gone a couple more quarters, maybe 9 more months doing this, but it would not be sustainable.

And at some point, something fundamentally has to change here. And I just felt that the longer -- the long we took to make this change, the more painful of it be. If I look at the strength of the portfolio right now and the growth -- all the growth prospects we have, the ability to add a whole new growth vertical. I just thought that the timing was right to do this and do this as quickly as possible to get through it. So we began implementing price promotion initiatives that are going to help invigorate growth. I think early signs right now, Larry, are encouraging.

Obviously, we're going to have to keep monitoring that. And then we're also launching a lot of new products to be able to kind of support that volume growth. We haven't had to reallocate R&D resources to be able to do that. This is a business that operates around 2%, 2.2% of R&D. So we just reallocated within that budget to focus on new product development. So we'll have a couple of quarters here where growth in Nutrition is going to be challenged. And then in the second half, we'll return to positive growth. And I've got confidence in the team that's in place today that we can execute this transition back to more of a volume base -- more of a volume-driven growth business.

If you look at what we did back in 2022 when we had supply disruption, it took us about 9 to 12 months to get our share back, I don't think it's going to take that long. So I think it's about a 6-month process here of reshifting that. And that's really what's creating -- I would say, part of it was creating a little bit of this first half, second half dynamic in our growth forecast. But outside of that, Larry, versus where we were in October, nothing has really changed. In fact, I'd say a significant majority of the company here is either maintaining high single-digit top line growth or low-teens growth or they're accelerating their growth versus 2025, whether it's our cardiovascular franchise, our diabetes products, EPD, our pharma business, we're going to be lapping the core diagnostic headwinds that we faced last year. If you remember, we had about $1 billion of headwind that we faced last year in our Diagnostic business, whether it was COVID and the China challenges, that's mostly going to be behind us.

We're going to be adding another high-growth vertical with Exact Sciences. So I think there's a lot to like here. I think there's a lot of growth here. And while we know we've got some work to do in Nutrition, I can guarantee to you that we're not distracted by that from all the great opportunities that we have here. So like I said, I think we've got a good setup for 2026, a lot of accelerating growth as we progress through the year.

Our next question will come from David Roman from Goldman Sachs.

I did want to start, Robert, on the pipeline and then maybe just ask a follow-up question, if we have time on the guidance and the outlook. You did talk about some of the approvals in the EP business and most specifically, can you help us sort of frame the Abbott portfolio in EP? Maybe looking back 6 months, where we are today, where you are then 6 to 12 months from now and contextualize kind of the portfolio relative to competition and where you see the biggest opportunities to accelerate growth there with Volt [indiscernible] [indiscernible] [ Flex Duo ], TactiFlex [indiscernible], I think you have a next-gen Agilis, NSight X, et cetera.

Sure. I mean I think that -- I do have to put that into context, though. I mean if you go back 3 years, David, there was a lot of concern about our franchise that was growing double digits, that was going to be flat or even negative because we didn't have a PFA catheter. We developed a strategy. The team put together a strategy we presented to our Board 3 years ago in terms of what we were going to do. And over the last couple of years, even without PFA products, we've been able to actually sustain our double-digit growth rate, '24 and 2025 without a PFA catheter. So the strategy that you're now referencing about our PFA products, that's just part of our strategy that we presented 3 years ago and laid out here. So we began launching the PFA product line in a much larger installed base of capital and mapping systems. The launch of Volt in Europe has gone very well.

I'd say when we talked about developing Volt, we said, let's look at where some of the shortcomings of our first-generation products are and can we build those into Vault. And the feedback that I continue to see from the European market and quite frankly, through the last couple of weeks as we began our limited market release here in the U.S. is 2 things keep jumping out pretty continuously is: one, the elegance, the ease and the smoothness and the predictability of the mapping integrated with the catheter, the visualization, all of that, that we spend a lot of time putting together. I continue to hear very positive feedback on that. And then the ability to potentially do these procedures with sedation versus general anesthesia, that is a recurring theme that I keep on hearing here. So I'd say the Volt launch has gone very much aligned to what we expected as we were putting the program together.

This year, we'll have the launch of Volt here in the U.S. and TactiFlex do internationally. I think it comes down to -- we always wanted to make sure that we had a toolbox approach here for the physicians. So they can have choice and they can have greater flexibility about how they use these products. I'm sure that there will be cases and types of patients and patient profiles that will lend itself more to a balloon and basket Volt-type design, and they are going to be types of patients and situations where TactiFlex Duo whether it's dual energy source will be preferred. And ultimately, it's going to be up to the physician to make those decisions. But I like the fact that the team as they put the strategy together that we would have both these products. I think you raised this point very well, which is I don't think that there is a company right now that's better positioned in terms of the completeness of the portfolio than what we have, whether it's technology or the scale and the infrastructure starting with the capital placements that we've got, the incredibly competent clinical specialists that we have out in the field that have shown their value to our customers right now.

We've got both RF and PFA products. We've got all the diagnostic elements, whether it's catheters, patches, et cetera, introducer sheets all of that that you referenced. And on top of that, we've got an LAA device, which is, I would say, is becoming pretty clear that if you want to be a leader in this space, you can't just look at having a PFA catheter, you got to have the full portfolio, including this device.

Right now, it seems like 25% of LAA procedures are done concomitantly. So I think if you put all of that together, the portfolio that we've assembled, combined with the resilience of what this team has done and how they've executed I've got high expectations for this business this year. The team knows that. I expect that we should grow at least in line with the market, David, which I expect -- I think it seems like the forecast here is is mid- to high teens. So I think we're in a really good position, and I'm excited to see the second part of the strategy that we put together 3 years ago, and we're really excited to kind of put that second part of that phase into action now.

Very helpful. Maybe just a follow-up on the guidance. Look, I think we all know that you don't solve your guidance to meet short-term consensus and you are committed to achieving your commitments. But as you've thought about putting together the outlook for 2026 considering some of the different variables that you faced over the past couple of quarters, like how did you think about risk-adjusting the outlook? And maybe just help us think about the considerations in the guidance and maybe just your philosophy as you kind of put the outlook together here.

Well, I mean, listen, I think if you look at our growth for 2026, I mean we've always targeted high single digits and double digit -- high single-digit top line, double-digit bottom line. That's our investment identity and we've kind of followed through with that. If you look at our 2026, I think the way you need to kind of look at it is you've got a very big portion of the company that is going to -- that we're sustaining that growth. In some cases, it will be accelerating. But a large portion of the company sustaining this high single-digit growth, whether it's in cardiovascular, whether it's in diabetes, we've got a bunch of new products launching to be able to support those kind of growth profiles in the business. EPD supporting with the biosimilar launch, that high single-digit kind of growth rate.

So you've got large portions and even some geographies that we can sustain that growth and we feel that supporting it with product launches and investment to sustain what I consider a pretty differentiated growth rate. Then you've got the second bucket, which is, I'd say, an acceleration in our diagnostics. And all that really is, is we've been doing very well taking share in our core lab business across the world. And what we had a challenge with last year is with COVID coming down. In 2024, I think it was like $750 million coming down to $250 million. So you had $0.5 billion headwind there. And then you had another $400 million headwind in China VBP, right? Our forecast for COVID is around that same number, around $200 million. So I'm not expecting any significant growth or decline. And a lot of the VBP, they come in waves.

The vast majority of our sales in China have gone through the VBP in 2025. So we really felt that impact in 2025. There's going to be more in China, but the shares that we have in those waves are very, very small compared to what we have. So you've got this whole lapping of our diagnostic business. And as long as we keep on doing what we're doing in the United States, in Europe and Latin America and other parts in Asia, which we have been doing, you're going to see a nice acceleration in our Diagnostic business. And you started to see that throughout the year as the VBP impact started to dissipate a little bit as the year progressed. You've got then, obviously, as I spoke quite a lengthier about this transition with Nutrition. You've got probably 1 or 2 quarters here where our growth is going to be challenged. But I am confident that what we're going to be able to do here is to reignite the volume growth, and you'll see that business get back to growth. So those elements there, Dave, really look at it, say, okay, you've got continued momentum in a large portion of the business. You've got some lapping that's going to be happening.

And then we've got this transition, which I consider to be pretty short term here for a couple of quarters, to be able to get this -- to get to this guide on the Nutrition side. And then I'm sure we'll talk about Exact Sciences, but that's another factor here about add-on a $3 billion-plus business growing 15% with a lot of growth opportunities for us. So that's kind of how we looked at at least from a top line. And then having that flow through down to the bottom line, making investments in the areas that we need to and nice gross margin and op margin profile expansion too.

Our next question will come from Robbie Marcus from JPMorgan.

Two for me. Robert, last week when we were talking, you said you expect CGM to continue the track higher at about $1 billion a year. That would put 2026, somewhere in the low to mid-teens. Is that the right way to think about CGM growth next year? And maybe if you just want to give your updated thoughts on market growth and Abbott's position there? And then I have a follow-up.

Sure. When you said next year, you mean 2026, right?

Yes.

Yes. I mean, I think, yes, there's all this debate that I read about that the market slowing and I get if you're just looking at percentages, and that's how you base yourself off it, then I guess, if it's that myopic, then I think okay, I understand the conclusion. But I don't consider growing $1 billion every single year and doing it 4 years in a row to be slowing down here, Robbie. I think the math will work out to what you just kind of highlighted there in the kind of low teens. But I think that's got a lot -- still a lot of opportunity for penetration in this, both from a market perspective, but then also from our opportunity, our ability to drive market share and market expansion.

I think that if you look at across all 3 patient groups, whether it's the intensive insulin user, the basal insulin user and the non-insulin user, all of those areas still there's so much penetration to be able to have here and you can see across the world, not just in the United States, but across the world, a lot of movement, whether it's patient groups, health care systems, they are looking to expand the use and the adoption of the technology into all these patient segments.

I know the U.S. gets a lot of attention, and it's an important market, and there's a lot of great opportunities for us there in terms of the non-insulin user reimbursement opportunity. I continue to see -- continue to see nice progress in this process. There seems to be a lot of support to do this. And the data that we've shown, like we've published 3 studies already that show that this patient segment also benefits with lower A1c, greater time and range, all the things that have driven kind of reimbursement in the other segments.

So I think that this is a very strong opportunity for us here in the U.S. And we'll see how it plays out. I think we'll see some language in the first half. And then how it all plays out with comment periods. You know this, Robbie, there's common periods with all of this. So I'm not baking that into my guidance, but I can tell you, we will be 150% ready to execute, whether it's having manufacturing capacity and having the scale and the position in the primary care -- on the primary care side, which is where that will probably play out more, we'll be ready.

So that provides an opportunity to outperform that consensus forecast. I think on the intensive insulin users side, I still think there's penetration to be had and adoption to be had, especially in international markets. I think it's only about 50% penetrated. So I think there's still a lot of opportunity to do the work that we're doing there. Obviously, scale and cost matter in the international markets, and I think we've got that position set. And then as you look at what I think is more specific to us, the opportunity to bring in a very differentiated product to look at market share shift in a segment that I'd say we're probably a little bit underrepresented from a market share perspective, which is on the pumper side with the launch of our GKS sensor.

I think that's going to provide us a great opportunity. I'm not going to try and pinpoint the exact quarter here, Robbie, when we get approval, we'll issue the press release and we'll be out. But we've been working hard already concomitantly with the regulatory process with KOLs, with physician groups, with payers, and I think there was an article that came out in the land set in January talking about beginning of this year, talking about the importance of measuring continuously [ ketones ] as DK is still a major care gap here for people with diabetes. So I think you've got a big opportunity here with this product for market share conversion.

I think one of the surprising things for me in this as we started to really double-click on these patient segments as we talked about the SGLT2 population. So we did some analysis in the U.S. You got about 6 million SGLT2 users in the U.S. And if you cross reference their usage of CGM through all the databases, only about 1 million of those 6 are on CGM. So I think there's -- I think there's going to be an opportunity here also to kind of create market expansion with this product. So not just share capture, but also market expansion. So this market is still very robust. It's becoming larger. So I get the law of big numbers kind of lowers those percentages.

But if you just look at it from a penetration perspective, Robbie, there's still so much to do in all these segments in different geographies that we're still very excited and making big investments, whether it's in sales and marketing, clinical, R&D and manufacturing because we still think that we -- this is still -- I'm not going to say it's the first or second inning, but we're far away from being from the seventh inning on this one. So I think there's still a lot of opportunity here and we're in a good position.

Great. Maybe just a quick follow-up. It's great to see you're still able to do double-digit EPS growth in 2026. I would imagine that's coming through the top line and margin expansion. How should we think about the magnitude of margin expansion and the drivers of it?

I'll let Bill take that.

Yes. Thanks, Robin. I couldn't be more proud of what the team accomplished in 2025, as Robert outlined, [indiscernible] coming uncertainties, volatilities and whatnot to still drive margin expansion. And that commitment to the execution and excellence there maintains in 2026 expect to do more of the same, focus on the things that are strategically aligned and the execution here to where continue to look at a 50 to 70 basis point improvement in operating margins every year and that's kind of what we've got built into this and fully expect we'll do that through [ Volt ] gross margin expansion as we've done, but continue to gain leverage in the P&L where appropriate. So that's kind of how we've constructed that double-digit earnings.

Our next question will come from Vijay Kumar from Evercore ISI.

My first one on -- maybe on the product side of year. Like you mentioned, another double-digit quarter. Just curious on where are we from a penetration standpoint, what innings are we in? And how durable is this double-digit growth in a category that's a pacemaker serve low single-digit growth category and you guys are doing double digits?

Sure. Well, I made some comments about -- we look at this rhythm management, $10 billion market as actually an opportunity to grow. So we have been making our investments there, obviously, is a big driver of that, but we're making investments in other areas of the portfolio to kind of be able to support our ability to take market share and grow at a differentiated rate here. To your question on penetration, listen, the global low voltage or pacing segment market is around $5 billion, whatever, $4.8 billion to $5.2 billion, depending on what you're looking at, but let's just call it $5 billion. I'd say AVEIR is about 10% of that right now. So early innings here for us for sure.

And as I said, previously when we began this process, I wasn't interested in just getting a flash in the pan sales growth for like a year or quarters. So we really worked hard and the team did an incredible job to really establish a new standard of care and get physicians trained. It's a different type of implant. So what we're seeing here is really nice growth in places that 1 year, 1.5 years ago, we began the training process and really seeing really strong penetration there.

If you look at just single chamber, I think right now the U.S. single-chamber pacing, which is about 15% of the total market, that's about 50% penetrated. So there's still a long opportunity here in the U.S. and quite frankly, globally, too. So I think the team has done an incredible job here. We've launched new products. We'll continue to launch new products in this space. And we think that this is the next standard in CRM is these devices that are communicating with each other that can be implanted transfemoraly and don't use leads. The clinical evidence in terms of what they're able to deliver is pretty impressive right now. So I think it's I think we've got a lot of investment here that will support this type of differentiated growth rate.

That's helpful, Robert. And my follow-up on -- or I guess the second question is on capital allocation. Any updated thoughts on Exact deal close timing, the dilution, I think you mentioned $0.20. When you think about your leverage levels, it's still costs be pretty modest. You still have capacity. I'm curious, when you think about M&A versus divestitures or spinoffs, Medtech right now seems to be -- spin-off seems to be the flavor of the season. I'm curious how you're thinking about those decisions.

You put a lot into that one there, Vijay. Let me see if I can unpack that. I think from a capital allocation perspective, I've always been pretty consistent with our approach. I don't have a formula that X percent goes here, Y percent goes there. We are committed to a growing dividend and we did that again for 2026 when we announced our dividend back in December. So we're growing our dividend. But outside of that, we'll allocate our capital in terms of what we believe is the best balance between short term and long term for our shareholders where we can create value. Regarding M&A, listen, my focus right now is integration closing Exact Science and integration. That's going to be my primary focus. I think post close, our gross debt-to-EBITDA ratio will be around 2.7x. So to your point, we still have plenty of capacity. But I think in the near term, I'd say focus on integrating Exact Sciences. And if there's opportunities for us to add, there are probably more tuck-in type size deals to take advantage of.

Regarding the status right now of Exact. I think we're making great progress towards closing. We submitted -- we've submitted all of our required clearances over here. There's a shareholder vote on the 20th of February. So right now, I'm not changing any assumption regarding timing of close or or kind of EPS impact. And as we integrate and as we put as we integrate the business, then we'll go updating it as we go along. But right now, there's no change in terms of timing and in terms of dilution. So I read your note last night, Vijay, I thought that you would have been asking a question about multi-cancer early detection and the opportunity that exists. I largely agree with your report.

I think this is going to be another great opportunity for us. And it's one that, as we looked at the deal, says, okay, greater reimbursement of this type of test will really make this a very, very large segment. I think the way I see this is the same way that we have our lipid panel test every year, the same way that we do a cardiometabolic panel or a white and red blood count panel every year after a certain age. I believe that if the product is right and performance is right, and it's priced the right way, I just envision this being that type of test. So I think that if that becomes the case, I think your forecast is way under called even on the upper side.

Our next question will come from Danielle Antalffy from UBS.

And Robert, just two questions for you on Nutrition. I appreciate all that you're saying about the strategy there going forward. But I guess first part of the question is what gives you confidence that these are the right prices that you're landing at today to drive that volume increase? Like did you guys do it's global. So I imagine it differs by market. And then the second question is now -- and tell me if I'm wrong here, but presumably Nutrition has a different profitability profile? And maybe talk about whether -- how it changes your view about how this fits into the entire Abbott portfolio?

Sure. Regarding the pricing, so we did some pricing work just before Thanksgiving in time for what usually is a pretty busy kind of retail activity. And -- so we did different testing here in the United States. We did different testing internationally also. We got the results back on the U.S. side quickly, you get to see the impact pretty quickly. And like I said in the comments, I think the early signs are encouraging. But I also said, hey, we got to keep monitoring this. You got to keep monitoring it for the consumer. You got to keep monitoring for competitive activities. But I think right now, based on what we have, I think we've kind of called it right. And regarding kind of allocating expenses, listen, we don't have a cookie-cutter approach across all the businesses. It always depends on momentum, opportunity, the balance of the short and the long term.

And so we take a very kind of detailed view in terms of how we're allocating yes, the profitability has improved in this business. I'd say it's probably from a profile perspective, going to be in line with what it was in 2025. We've obviously got to make some adjustments in our spend level and learn how to spend a little bit better, and we did that also in Q4, shifting some of the focus from kind of marketing and brand to a little bit more kind of price and promotion, at least for the next 6 months. And that way, we're able to at least kind of maintain a kind of steady profile over here.

Our next question will come from Matt Taylor from Jefferies.

So I wanted to start with diagnostics and see if you could unpack some of the dynamics there a little bit more. You touched on the China headwinds in VBP and mentioned some smaller programs or categories there. What's the outlook like for Diagnostics in China? It does seem like the rest of the world is doing fairly well. But what do you foresee for China growth this year and next in diagnostics?

Well, specifically in diagnostics, like I said, I think we've gone through what I would consider the bulk of our VBP based on the strength and the market share we have and the different assays, the way they're going about this is they're just looking at categories of assays and then kind of implementing it in the first -- the first 2 were the ones that we had over 40%, 45% market share in those markets. So we kind of felt that pretty significantly. I think the next -- the next big area of VBP is going to be in the -- on the -- just your regular kind of core lab oncology testing, and we have very little market share over there. So listen, we put a new management team in place there, put our most experienced commercial person that is driving that business.

We've done a lot of work there between working with our distributors segmenting the market, looking at our product portfolio, looking at different types of product offerings new product offering versus legacy product offering. So I think the teams have done a really good job there. And my expectation with that business going forward is, listen, I'm not expecting big growth out of it. All I need for it is to be pretty stable. And it being stable, I get to have the other parts of the portfolio that are accelerating. Our U.S. business has actually done better than what it's done in the past.

So we're capturing market share over there. Our Latin America business is doing better than what it's done in the past, capturing market share there. Our European business is continue to grow. We've got a good position over there. So I'd say the outlook of that business is we will be, I'd say, mid-single-digit growth this year versus kind of where we were in 2025. And if you if you remove China, again, this is a full year view. If you remove China, then you're in the -- you're in that kind of 7% to 8% kind of range. So I don't like doing that, Matt, because China is part of our business. So -- but you'll see an acceleration even with China just because it's a little bit more stable versus where it was last year.

Great. And maybe I could just ask a follow-up on diabetes. You talked about some optimism for the outlook for the market and specifically around the non-insulin type 2 coverage. We've seen the guidelines change inside and definitely see a potential for that coverage to expand significantly. You mentioned you've seen some progress in the process. And I guess I was wondering how you think that could play out in the first half of the year? What forms the new coverage could take? Or any other thoughts that you had on that?

I don't want to get ahead of myself. What I can tell you is, listen, there's definitely support the support from the ADA, their support from other physician groups, okay? And their support because the clinical data is backing that support up, right? I mentioned that we've got 3 studies that we did with that patient segment, and it shows this improved A1c and this better time in range. So I think the support is backed up by clinical evidence and you've got a U.S. HHS and CMS sees the value of this type of technology sees the value of being proactive in managing your health even if you're not taking medications or you're not taking insulin, bring this type of technology improves outcomes.

So you have a receptive CMS, let's call it like that. Like I said, I think you're going to see some sort of language, Matt, first half, okay? But I know how these things go. We've gone through them so many different times in different parts of the product. Language will come out, then there'll be a 90-day comment period, and then there will be a 60-day period to be able to evaluate it. And right now, could that be a different process? There could be a different process. It could be a much shorter comment period. It could be a much shorter implementation timeline because there is this support and desire to bring this to more people. But like I said, in that I'm not going to bake that in just yet, but I am being prepared. I mean the team is prepared. I mean if it happens next week, I'd tell you they'd be prepared. So we're doing a lot of work there. I think the key aspect, as you think about that expansion, is that it's going to happen predominantly in primary care. So how well are you set up, how well is your sales force deployed? How well is your integration into the health care systems with Epic and other. So that's going to be an important part. And outside of that, I think we should just be -- I think, very enthused. I'm very enthusiastic that this will happen, whether it happens in the second quarter, the third quarter. For me, like I'm thinking about this, this is going to be a huge opportunity for this market, not just in the U.S. but globally for years and years to come. So let's just get it right.

Our next question will come from Travis Steed from BofA Securities.

Maybe to spend some time talking about in medtech kind of the macro procedure environment, given some of the worries on ATA subsidies? And then I'll just go ahead and throw my second question out. When you think about for total Abbott in growth over 2026? Should we think about more Q1 first half being more in line with kind of the Q4 growth and then improve from there over the second half?

Yes. So yes, I think that's probably good. I mean I think sometimes these puts and takes, it kind of just max. Sometimes it feels like you're better than what you are because you're lapping something. So I tend to look at it also on a 2-year stack basis. So if you look at it on a 2-year stack basis, it looks pretty -- there is some acceleration in Q3 and Q4, but not to the extent without just on a 1-year basis. But I think that's the right way to look at it. Obviously, we're always striving to do better, but I think that's -- it's a good starting point. What was your other question on medtech volumes? Listen, I think I read some report that there were some concerns about medtech volumes in Q4. We just reported our Q4, you're going to have a bunch of medtech companies that will report over the next couple of weeks. I would be extremely surprised if you hear that volumes were short in Q4.

Our volumes are really good in Q4 across all of our categories, even what is considered -- what we call more foundational or traditionally more slower growth kind of segment. So I think the evidence on our print and our guide is not suggesting that the medtech volumes are slowing. And and I think there continues to be, given the innovation that's happening in the space given the clinical evidence that's being generated with that innovation, I still see this as a very attractive segment, not just for this year or next quarter, but for many, many years to come.

Our next question will come from Joanne Wuensch from Citi.

I think I'm allowed to still say happy new year. Two questions on -- I'll put them right up front. EPD has sort of held up there in high single digits pretty consistently, but the macro landscape is getting a little bit more complicated as we sit still here. I'd be curious if you see anything that we need to sort of be aware of over the next 12 -- maybe 12 to 18 months?

And then my second question has to do with structural heart. It looks like your multiple products, we'll call them multiple shots on goal is keeping that growth rate going nicely. Anything you want to call out in particular or anything we should be looking at for the upcoming medical meetings.

Sure. Regarding EPD, yes, I mean, I think this is -- this team is incredibly resilient. And I get that there is some concern about geopolitics going forward. But let's face it, Joanne, there's been macro challenges, at least since I've been in this role for the last 5 years. And so I -- yes, we've got to pay attention to them. Yes, we've got to navigate, but I'm going to rely heavily on a team that have shown that they can actually do that and do that in pretty difficult circumstances already and continue to be able to drive the business in that 7%, 8%, 9% range here.

So yes, it's -- we got to be mindful of it, but this is a team that -- at least in these markets, have proved to be very resilient, have deep connections in the market, deep relationships clinical distribution-wise. So -- and now that we're bringing our biosimilar portfolio into these markets. Biosimilars are now the fastest-growing generic kind of segment. I feel good about this business.

I think the idea of bringing this differentiated portfolio into a team that has done extremely well in navigating all of this. I think we've got also strong aspirations for this business. So yes, we'll keep an eye on that, but I don't think that it's something completely new for us for this business. We operate in 160 countries. We're truly a global company. So we will have to figure it out. So -- and then I think your question on structural heart I mean this is an area that we've invested heavily over the last couple of years. We've developed a, what I would consider, best-in-class portfolio across all 3 valves. And I think we've got a lot of upcoming growth catalyst that will move its way through.

I think the got great new products with Navacor, TriClip, Amulet. Most of these on the early are, I believe, still in their early cycle. You guys always would ask me about like when will MitraClip grow get back to growth. I just clearly say, we did double-digit growth in MitraClip. I think that's a result of some of the guideline changes that we're seeing and kind of reigniting some of the growth here in the U.S. But we've got a lot of opportunities, a lot of things going on in this business. We had label expansions in Navitor and MitraClip. We got a next-generation repair technology coming out with both MitraClip and TriClip, our fifth generation.

I mentioned guideline changes to MitraClip and TriClip, that's having an impact. We just got approval or got approval for TriClip in Japan. That's a whole new market for us that we see a huge opportunity, a big opportunity for us, and we're launching that as we speak in Q1. We've done some bolt-on M&A in this business. I think I mentioned this last time, we acquired a company called [indiscernible] Lab, which is an AI-powered imaging interventional cardiology company that's -- we're integrating that into our product offerings now for pre-procedure planning. So I think that's going to help also since imaging is such an important part in these procedures. And then the pipeline looks really good, too. We've got our next-generation Amulet, expect to be launching that beginning of next year.

We're going to go into trial into our ID trial with our balloon TAVR in the second half of this year. So again, as I'm thinking about, I know what's going to launch in 2027, and I know the impact that those launches are going to have in terms of our growth rate, and we're building our pipeline to be able to ensure that we can sustain that growth in 2028. And I look at this balloon TAVR program has really been important to do that. And then we're also going to start our an IDE trial for our transfemoral transseptal mitral valve replacement program, too, which I think is going to be best in class.

So I think this team has got not only an incredible pipeline to work with, but we've also been making the investments on the clinical side clinical teams, sales reps across the world. So I think we're well positioned in our structural heart business.

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

And our last question will come from Josh Jennings from TD Cowen.

Just keep it to one on capital allocation, starting to circle back. But I think the focus for your team, Robert, has been to kind of look at inorganic adds for the devices and diagnostics franchise that played out with the Exact acquisition. I mean is -- should we be thinking that, that remains the focus or is the Nutrition recovery? Can that business get back to mid-single-digit growth without any business of external business development initiatives.

Sure. Yes. Listen, I'd say the capital allocation regarding M&A and kind of our focus is it's going to be in those 2 areas, right? Medtech and Diagnostics is where we see an opportunity. I don't consider a need for inorganic in our Nutrition business to execute the strategy that I just described, which is to place a lot more emphasis on volume growth.

I think we've got the right products, the right brands and the right teams in place to be able to kind of do that. I think the biggest investment that we're making is we're seeing the impact of that now, which is addressing kind of price points and doing it comprehensively across the world so that we can get everything kind of reignited back to volume growth. So I'd say that's the focus is medtech and diagnostics. So I don't think anything changes there.

So I'll just close here with a few comments. Listen, we've got -- I think we delivered a pretty strong year in 2025. Obviously, there were challenges. There will always be challenges. We delivered on our original EPS target of double-digit, healthy margin expansion. I think I spent some time on this call talking about our pipeline and how we think about our pipeline and ensuring that we have a nice cadence of pipeline going forward. Not just what we're launching this year, but what we're investing in this year so that we can be ready to launch in '27 and '28. So I think the pipeline has been very productive. And we took a very important strategic step to shape Abbott for the future with the announcement of the Exact science acquisition. I think that's going to add a whole new growth vertical for Abbott. And I think that cancer diagnostics is going to be a very important clinical and medical need for society -- for global society. So I think well positioned there, and I feel good about the timing and everything that we put in place there. So as we transition to 2026, I think I highlighted here, we've got a lot of businesses that are going to sustain what I would consider pretty differentiated growth rates, high single digits, teens and we can support those with the investments we made and the product launches that we've got. And then we've got some large businesses that are going to having some inflection points and some acceleration, whether it's Core Lab or even our electrophysiology business here.

So I feel good about what we've got put in what we've laid out here in terms of our plan. Obviously, we strive to do better than that, and there's opportunities to do better than that. But I think as we sit here in January, this is a good starting point. And with that, I'll wrap up and thank you for joining us.

Thank you all for your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11:00 a.m. Central Time today on our website, abbott.com. Thank you for joining us today.

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

Good morning, and thank you for standing by. Welcome to Abbott's conference call. [Operator Instructions]. This call is being recorded by Abbott. 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. It cannot be recorded or rebroadcast without Abbott's expressed written permission.

I would now like to introduce Mr. Mike Comilla, Vice President, Investor Relations.

Good morning, and thank you for joining us to discuss Abbott's agreement to acquire Exact Sciences, which we announced this morning. 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, please note that we issued a press release and posted a slide presentation this morning announcing the transaction on Abbott's Investor Relations website at abbott.com.

As a reminder, some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995. Page 2 of our slide presentation and the press release that we issued earlier today contain additional information on forward-looking statements and other important information on the proposed transaction.

With that, I will now turn the call over to Robert.

Thanks, Mike, and good morning, everyone, and thank you for joining us. Today marks another exciting moment in Abbott's history, and I'm pleased to announce that Abbott has entered into a definitive agreement to acquire Exact Sciences, a leader in advanced cancer diagnostics. This acquisition reflects our unwavering commitment to our company mission, which is to help people live healthier and better. We pursue our mission by improving health through innovation and expanding access to life-changing technologies.

And throughout our history, Abbott has stood at the forefront of taking on the world's most pressing health care challenges. We've transformed care in diabetes, pioneered breakthroughs in the treatment of cardiovascular disease and delivered solutions that combat infectious diseases. And today, we're expanding our mission to add cancer to that list.

Each year, approximately 20 million people around the world are diagnosed with cancer, including more than 2 million Americans. And that is why we have made it a priority to expand our presence into this critically important market. The technologies developed by Exact Sciences help answer the three most critical questions in cancer diagnostics: Do I have cancer? What is the best treatment for my cancer? And is my cancer in remission?

Exact Sciences has built an exceptional portfolio of products and capabilities that provide answers to these fundamental questions. This includes Cologuard, the leading noninvasive test that has transformed colorectal cancer screening, making it easier to detect one of the most treatable yet undiagnosed cancers in the world. Cologuard's noninvasive at-home format has propelled it to become the primary colon cancer screening tool used by millions of people each year.

In addition to Cologuard, the portfolio includes other cutting-edge technologies, including Cancerguard, a liquid biopsy screening test that, with a simple blood draw, can detect more than 50 types and subtypes of cancer, including those responsible for over 80% of cancer diagnosis in the U.S. each year; Oncotype DX, a personalized therapy selection test that analyzes genes in a tumor sample to help predict the risk of cancer recurrence and provide personalized insights for more informed treatment decisions; Oncodetect, a minimal residual disease, or MRD test that delivers a clear detected or not detected results to monitor for the recurrence of cancer following treatment; and Riskguard, a genetic test that helps assess hereditary risk for certain cancers.

From a strategic standpoint, this acquisition further strengthens Abbott's leadership position in diagnostics and expands our presence into one of the fastest-growing areas of health care. From a financial perspective, it is equally compelling. Exact Sciences is projected to generate over $3 billion in revenue this year with high teens organic sales growth rate and an adjusted gross margin profile of more than 70%. With the addition of Exact Sciences portfolio, we expect to double the size of our Diagnostics TAM from approximately $60 billion to more than $120 billion.

But beyond the numbers, this is also about impact. And this acquisition positions Abbott at the forefront of the next era in diagnostics, one that is more preventative, predictive and personalized. The team at Exact Sciences has built a remarkable legacy with a culture of bold thinking and relentless pursuit of innovation. Their ability to challenge standard conventions and deliver transformative solutions in cancer diagnostics has been extraordinary. Their accomplishments reflect not only a great degree of technical excellence, but a deep sense of purpose.

Combined with Abbott's global scale, reputation for operational and commercial excellence and strong relationships with health care systems around the world, this combination will create a powerful new growth platform and unlock new opportunities to build upon in the future. Together, we will reach more patients to help prevent cancer, enable earlier detection and empower physicians and consumers with data-driven insights that support more informed personalized care decisions.

We are excited to welcome the exceptional team from Exact Sciences into the Abbott family, and we look forward to sharing more as we move towards closing this transaction next year.

I'll turn over the call to Phil.

Thanks, Robert. Under the terms of the agreement announced today, Abbott will acquire all outstanding shares of Exact Sciences for $105 per share. This represents a total equity value purchase price of $21 billion and corresponds to an enterprise value of approximately $23 billion. We anticipate the transaction will close in the second quarter of 2026, subject to customary closing conditions and regulatory approvals.

Upon completion, we expect the acquisition to be accretive to Abbott's top line growth, adding approximately 50 basis points to our total company sales growth rate and approximately 300 basis points to our sales growth rate of our Diagnostics segment. With respect to margins, the addition of the Exact Sciences business is expected to increase Abbott's adjusted gross margin profile by approximately 100 basis points and increase the adjusted gross margin profile of our Diagnostics segment by approximately 700 basis points. As it pertains to synergies, the acquisition is expected to deliver at least $100 million in annual pretax synergies by 2028.

To finance the transaction, we intend to use proceeds from a combination of cash on hand and debt financing. Based on conventional methodologies, we expect our adjusted gross debt-to-EBITDA ratio to be approximately 2.7 following the close of the transaction. Abbott has a long-standing, disciplined and balanced approach to capital allocation that we intend to maintain. This includes maintaining a competitive dividend payout ratio and continuing our more than 50-year track record of increasing our dividend each year.

From an earnings perspective, we expect this transaction to be dilutive to adjusted earnings per share in the first 2 years following the close of the transaction and accretive thereafter. This includes an estimated dilution impact of $0.20 in 2026 and $0.16 in 2027. Contemplating these impacts, we anticipate a return to double-digit earnings per share growth in 2027.

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

[Operator Instructions] Our first question comes from the line of Vijay Kumar with Evercore.

Robert, congrats on the transaction. We've followed Exact for many years. I think it's a great asset. We like it. I'm curious, from your perspective, what is it about this asset that you like that compelled you towards this transaction?

Sure, Vijay. As I've said multiple times on conference calls, it starts with our strategy and then obviously applying financial discipline that we have here. And we're always looking to create and build new growth verticals, and this was obviously an area in a space that we were interested in. So I think it starts first with the actual space in the area and why is it attractive.

It's attractive because there's such a clear clinical and medical need with this. As I said in my comments, the growing incidence of cancer around the world, 20 million diagnoses every year, so there's a clear need here as you think about cancer care and cancer care today versus what it was maybe 30 years ago. It's a continuum. And that's a result of great innovation from a pharmaceutical standpoint. But with that, you need reliable and broad access to diagnostic testing.

And you know the space, like you said. You need to be thinking about screening and your ability to kind of screen and find ways that are less invasive to be able to screen and screen earlier. We know how important early detection is. You have a whole other segment on therapy selection and determining what's the right therapy that will have the best impact or deliver the best outcome in terms of managing the cancer and then, obviously, your ability to kind of monitor for recurrence. These are all multibillion-dollar segments and they're growing rapidly.

So there's definitely a real growth trajectory that we're seeing across all these segments. So we've been looking at ways over the last year as we're studying this, and what are the best ways for us to enter this. And as we're studying, what we've really, really thought was just Exact was the perfect company to combine forces with. They're very, very attractive. And quite frankly, I've been very impressed by them, by their team, by their products, by their go-to-market strategy. So I see this as a very unique company in this space here.

They're a scaled business, Vijay. You know that. And you don't achieve scale just by saying, we're going to do it. It takes time, it takes effort, and they've definitely done it. And they've got scale commercially, operational, in terms of market access.

I think the second thing here is just their revenue is accelerating. And it's not just the new products that are being launched, even the existing products and iterations of these existing technologies and products are seeing revenue acceleration. And then combined with that revenue acceleration, you see profitability is also accelerating. And this has been an area that they've been focusing on. And if you look at a lot of different assets in this space, maybe they've got some revenue scale or building scale, but really far behind from a profitability standpoint.

They've got position in all these three segments, Vijay, and I think that's important for us. Obviously, depending on the different kind of segment, they've got stronger position than others, but they do have positions in all these three segments. And if I look at their pipeline, I think it's an extremely, extremely attractive pipeline and clinical readouts that are going to support this double digit. So our vision here is really to build the premier cancer diagnostic company in the world. And I think to do that, you need to be in all of these three segments. And I think Exact puts us -- a combination together with Exact Sciences puts us in a really good position to go after that.

And I know we're going to be successful. And as we do that, we're going to add a whole new growth vertical to Abbott, which I think is also very important. It's going to strengthen our Diagnostics business. And from a total Abbott perspective, I think on Phil's comments, we wanted to make sure that we weren't diluting our already high single-digit growth rate. And that becomes difficult when you got the size that we have. So it adds 50 bps of growth to the total company and then 100 bps of growth on our gross margin profile. So I think there's a lot to like here, and I'm really excited about this combination.

That's great. And if I may, one more, Robert. You mentioned base acceleration. Certainly, they got the pricing uplift. I think that's helping. But more importantly, on the pipeline, I think '26 is going to be really key for them with their CRC MRD launch, I think, later in the year; maybe breast MRD launching; MCED, multi-cancer screening ramp-up; potential liver cancer screening and high-risk population launching. Which of these are you most excited about when you look at Exact's pipeline? And what incremental value can Abbott add here?

It's like a parent's heart, Vijay. There's room for everybody and there's excitement across all those tests, to be quite honest with you. I think there's near-term growth catalysts, so talk about 2026, 2027. There's kind of medium term out there with '28 and '29 and then all this great potential kind of long term also. I think all those tests that you referred to are attractive. We're excited about all of them.

But they fall into different buckets. If I think about short term, the excitement on Cologuard, I think there's still a lot of growth in the tank, whether it's the conversion of Cologuard Plus, whether it's the rescreen momentum that they're seeing. I think that's a great growth catalyst. I think the Oncodetect in the MRD space, I think you referenced some of the different assays there, I think that's going to be extremely exciting for us.

And then Cancerguard, as you look at -- this has come out as a cash pay product in the U.S. I think there's a lot of opportunity international with this. But there's going to be an opportunity here to continue to invest in this platform to be able to improve its performance to the point that it can get broad reimbursement coverage, not just in the United States but around the world. And I think for me, that's the critical thing here, is early detection saves lives and it optimizes treatment and therapies.

So there's a lot to be excited here, Vijay. And you know the space pretty well. But there's a lot of opportunity here for us. And I think key to all of this is Exact Sciences team, their management, their R&D, their scientists, top-notch, everything that I've seen.

Fantastic. And congrats again, Robert.

Our next question comes from the line of Larry Biegelsen with Wells Fargo.

I'll echo my congratulations, Robert. So I'd love to hear you talk about the cost and potential revenue synergies. The cost synergies seem low, given how much Exact spends on G&A. And do you see any potential revenue synergies? So for example, you have overlapping call points on primary care physicians. And how significant is the international opportunity that I think you alluded to in your earlier comments? And I'll leave it at that.

Sure. Well, let me just start off by saying this is the largest transaction in health care in the last 2 years. I was going to put that in my script. I decided not to, so I'll verbalize. And it's the largest transaction ever in the diagnostics space. And we didn't do it because this was a company that wasn't being run well, much to the contrary. Like I said in my earlier comments, I'm very impressed by the whole management team there in terms of what they've built and how they've gone about building it. So we did this acquisition for all the reasons that I highlighted.

And if you think about it financially, tying into your synergies question there, I mean, the ROIC right now for this deal is projected to be high single digits by year 6, so very similar to what we accomplished in the St. Jude deal. And we're going to get there, Larry, not through like cost synergies. Yes, we have some of them in there. But it's not going to be about cutting programs or cutting investments and things like that. It will be more about, okay, can we use some of the Abbott scale, whether it's in procurement and other operational aspects that we can bring some assistance to the already efforts that Exact Science is doing from a cost management perspective.

The path to get to high single-digit ROIC is actually sustaining the mid-teens growth rate profile. And if you can do that over the next 3 to 5 years here, definitely in the next 5 years, and then allowing that gross margin profile to fall through and leverage on the existing investments and fall-through. There are definitely things that they do that we've got experience doing, even though cancer will be a new area for us. But yes, they do have a large primary care sales force. So do we. My learning there, Larry, is that might look well on paper, but primary care sales call points, you can't load up on products. These are fast calls. They're busy physician groups.

But we know how that organization -- we know the dynamics of how primary care sales forces are run. So I don't see ourselves cross-selling products across here. Libre does really well. There's a lot of growth opportunities over there. And Exact Science is going to have a lot of growth opportunities in the product that it is developing. But they've got plenty of capabilities that are best in class. And they're not new to us, whether it's navigating regulatory, navigating kind of payer coverage, direct-to-consumer advertising and the supply chain. I mean, these are all things that, while a new area for us, they're not capabilities that are completely new to us.

So our focus here is really on the combination and what we can do better. And we can achieve these returns more through ensuring that the revenue continues at this high clip over the next 5 years and ensuring that they've got the resources and the investments needed to be able to compete in what is a pretty competitive space right now. And then I can't remember what your other question was.

International.

Yes, yes. I think international is going to be a great opportunity. I think as you saw in the materials that we put out there, the majority of their revenue is US-based. And on one end, that's good for us. But we also look at the opportunity internationally to be able to expand. And I think that's a critical area that we're going to be looking at.

When I go back to the St. Jude integration planning, we had like five key things that we wanted to make sure that we got right. And I've got my list of five things that we want to make sure we get right when it comes to integration with Exact Sciences. And figuring out our international model here and how to think about it and how to leverage the opportunities that are built into the Abbott infrastructure and doing it in a way that's accretive, that's on top 5.

So I think there's a lot of opportunities there, whether it's in developed markets. Quite frankly, even more exciting, I think, will be some of the emerging markets and the opportunities we have there too with the beachheads we have there. So I think it's an opportunity and it's a top 5 on my list.

Our next question comes from the line of Robbie Marcus with JPMorgan.

Congratulations. Just one for me. Robert, one of the concerns on Cologuard is the durability. And I know that Exact also has an MRD test, so there might be some market expansion and synergy there as you think about durability. But how are you thinking about the life of the asset, blood versus stool testing? And what's built into the assumptions? Appreciate it.

Sure. Well, I think there's two separate things, right? The sustainability of Cologuard and then kind of MRD is a different segment, I think, are separate things there. I'd say right now, the growth of Cologuard is increasing. I think you've seen that on their last earnings report. And as I said in answering Vijay there, there's conversion of their Cologuard product to Cologuard Plus. That's got a better sensitivity and there's obviously a price uplift as a result of that.

But I think very important also here is the rescreens that occur, right? So for you to get a screen every 3 years at a very cost-effective position for the payer and understanding, I think, that's been something that's been maybe unappreciated is how these rescreens roll in. I think the way to think about this, Robbie, is just think about kind of the CRM kind of de novo and replacement cycles that occur in that part of the business. Those are 7- to 10-year kind of de novo replacement. These are every 3 years. So I think the growth rate of Cologuard is very robust and the numbers are showing that.

I think you might be referencing kind of the notion of having a blood test versus a stool test. And I'd tell you, from what I've seen, the introduction of blood test has actually possibly contributed to Cologuard's growth rate, especially given the significant commercial infrastructure and coverage that they've got in this market. So we actually haven't seen the introduction of a blood test take away from the momentum of Cologuard. From the numbers that I've seen and gone through, it actually increased it.

And as you know, Exact has an agreement with another company that's given them access to a CRC blood test. I actually see that as a TAM expanding test, not necessarily a test that's going to kind of take away from kind of the momentum of Cologuard. So I think that they're very well positioned in this space. They have the leadership, they have tests and they have all the infrastructure that supports its growth.

So I think we feel very good about how we've modeled Cologuard, how we thought about the introduction of blood-based testing and its ability to achieve a level of sensitivity not just with overall but even in early detection of cancer and the ability for those tests to get the kind of reimbursement that Cologuard has. So I think we feel very good about the current trajectory that Cologuard is on and what we've modeled going forward.

Our next question comes from the line of David Roman with Goldman Sachs.

I wanted just to start on a little bit more detail on capital allocation. I think you referenced in the presentation starting 2026 at 2.7x debt to EBITDA, which is still a very favorable position to sit in. So maybe you could just help us think through some of your -- the implications to broader capital allocation. I know Phil made a reference to the dividend payout ratio, but how this informs kind of capital allocation on a go-forward basis.

Sure. Listen, I think we've built up a lot of the flexibility to be in a position that we're in today and to be in a position to be able to combine and acquire kind of high-quality assets like this. Our intent is to pay down debt over time and increase even more the flexibility that we've got. And we've demonstrated, Dave, that we're capable of doing that. If you look at where we were post Alere and St. Jude acquisitions, we've built back flexibility in real short order. So if you looked at where we were after those two deals, we're at about 4.5x. And in 3 years, we brought that down to 2.2x.

So listen, in the near term, we still have flexibility. I think as you pointed out, 2.7. We still have opportunities and we could add to the portfolio, again, if we see an opportunity that makes sense, that makes strategic sense, that makes financial sense, like we said. But I can tell you my primary focus right now is really on closing the transaction, successful integration and then building back that flexibility and bringing down that debt-to-EBITDA ratio. And we've got a proven track record of doing it.

And I'd say as it relates to our capital allocation plan, I've always said that we're balanced. We've got probably at the core of our allocation a dividend and a growing dividend. And I think that, that's an important part of our identity. It shows our confidence in our future cash flows and ability to deliver those. We've got some debt towers that we're going to pay down next year and probably not going to refinance those. So I think we've been good allocators of capital here and show that we have this balanced approach, and it serves our long-term shareholders very well.

Our next question comes from the line of Travis Steed with Bank of America Securities.

Congrats on the acquisition. Maybe two questions, I'll ask them both upfront. One, how do you think about cancer over time? And this is kind of the first foray into cancer. Should we think about this as kind of a beachhead to move more into cancer diagnostics and cancer med tech over time?

And then kind of talk about the investment kind of required to grow this asset. There's some wondering why synergies can't be a little bigger than what you've just kind of put in the slide deck.

Sure. Listen, we're making a pretty significant move here that is more long term in terms of how we see medical need and clinical need across the global health care markets. So I think the way I kind of phrased this in the first question was we know this is an important area. It's an area that we want to get involved in with the capabilities that we have in the areas that we know. We know that diagnostics is an extremely important element within the health care system overall.

And it's not different in cancer. In fact, I would say it's probably even more important as we think about the future management of cancer and the development. The reality here is the earlier you can detect it, the more treatable this is. And the ability to really tackle that on head on together with Exact is very exciting.

The term beachhead would imply that there's other things on the horizon. And right now, like I said, my focus here is doing a real strong integration, making sure we can capitalize on all the growth opportunities that exist with Exact Sciences and we don't miss that opportunity. So I look at this as a long-term space for us. Whether it expands us into med tech, it could be. I'm not going to say that I've looked at it because I haven't, but I am aware that there is this segment. But right now, our focus here is looking at cancer and oncology through the lens of diagnostics. And we think that's where we can bring a lot of the value to it.

And I guess regarding your comments on the synergies and if that's the disconnect that people think. Like I said, we've delivered very healthy returns on the invested capital. We've shown that. The data shows that. The way I think about generating a strong ROIC on this transaction, Travis, is not necessarily going in and cutting programs and expenses. That's not on my list. The list here is really to be able to sustain teens growth over the next 5 years and just think about what that will do to the total Abbott growth profile and then be able to leverage that growth rate and have it fall through the gross margin and leverage on the existing investments that have been made.

So that's how we're going to deliver the return. It's not necessarily going to be on cost-cutting programs. There's an opportunity, without a doubt, I'm assuming, to be able to look at areas that from a global perspective we can help. But it's not about looking at their program versus our program because we don't have programs. So we like their programs, and that's why we did this deal.

So I think that -- so I'll just finish here by saying this acquisition, for us, is strategically aligned to our mission and our identity. It further strengthens our position in diagnostics and it's a whole new growth platform that's going to unlock a lot of opportunities for us. As I said, they are a scaled business. They are a very, very impressive team. Their portfolio is very rich. And I'm very excited about this acquisition and what it's going to be able to do for us, not just strategically but also financially. So thank you for joining us.

Thank you, operator, and thank you for all your questions.

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

Thank you.

Good morning, and thank you for standing by. Welcome to Abbott's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 expressed written permission.

I would now like to introduce Mr. Mike Comilla, Vice President, Investor Relations.

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Phil Boudreau, Executive Vice President, 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. We 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, 2024. 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 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's 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.

Thanks, Mike. Good morning, everyone, and thank you for joining us. Today, we reported organic sales growth of 7.5% excluded COVID test sales. Our growth was led by double-digit growth in Medical Devices where several high-growth segments showed an acceleration in growth in the third quarter compared to growth in the first half of this year and also high single-digit growth in Established Pharmaceuticals led by double-digit growth in our key 50 markets. Earnings per share rose to $1.30, up high single digits compared to last year and up double digits when excluding the impact of the expected large year-over-year decline in COVID test sales that occurred in the third quarter.

Our performance continues to be driven by innovation, positioning Abbott to consistently deliver high-quality results and durable long-term value to our shareholders. Recently launched new products generated nearly $0.5 billion in sales this quarter, and added more than 100 basis points to organic sales growth. Looking ahead, we expect increasing contributions from new products across the portfolio with a balanced mix of iterative and transformative innovation.

I'll now summarize our third quarter results in more detail before turning the call over to Phil. And I'll start with Nutrition, where sales increased 4% in the quarter, led by adult nutrition business. Ensure remains the cornerstone of our adult nutrition portfolio trusted by millions of consumers seeking to maintain or improve their health, strong brand recognition, combined with favorable demographic and dietary trends, including an increased focus of protein intake and immune system health continues to fuel our growth.

Growth in Adult Nutrition was driven by 10% growth in international markets where we continue to see strong demand for both Ensure and Glucerna and to support future growth, we continue to invest in these well-known brands to ensure they evolve along with changing consumer preferences. We recently launched a new version of Glucerna that contains only 1 gram of sugar, and later this month, we'll launch a new version of Ensure that contains 42 grams of protein.

Moving to Diagnostics where we saw modest sales growth in the quarter excluded COVID testing sales. As expected, challenging market conditions in China impacting both price and volume remain a headwind for our core lab diagnostic business. Excluding China, Core Lab Diagnostics grew 7% with markets such as the U.S., showing an acceleration in growth in the third quarter compared to growth in the first half of this year. Our strong consistent performance outside of China reflects durable underlying demand in markets around the world. And growth of 8% in point-of-care diagnostics was driven by growing adoption of 2 first-of-a-kind tests, our point-of-care concussion test and a high-sensitivity troponin test, which allows for earlier and more accurate detection of a heart attack.

Turning to EPD. Sales increased 7%, led by double-digit growth in our key 50 markets, highlighting broad-based demand and strong commercial execution. From a product portfolio perspective, several therapeutic areas delivered strong contributions, including gastroenterology, cardiometabolic and pain management. These areas continue to benefit from favorable demographic trends and growing demand for high-quality, affordable medicines. We continue to make good progress as it pertains to our biosimilar strategy, a key growth pillar for EPD. During the quarter, we advanced the regulatory approval process for several biosimilars and remain on track with our planned cadence of product and geographic launches that began this year.

And I'll wrap up with Medical Devices, where sales grew 12.5% and driven by double-digit growth in Diabetes Care, in electrophysiology, in cardiac rhythm management, in heart failure and in structural heart. In Diabetes Care, sales of continuous glucose monitors were $2 billion in the quarter and grew 17%. In Electrophysiology, sales grew double digits in the U.S. and internationally. The launch of our new Volt PFA catheter in Europe continues to go very well and helped deliver double-digit growth in ablation catheters and international markets this quarter. Feedback from European physicians who have used Volt continues to be very positive, and we look forward to bringing bulk to the U.S. market next year.

In Structural Heart, growth of 11% was led by share gains in TAVR and growing adoption of TriClip. During the quarter, we achieved important milestones in our Structural Heart business. In July, we received regulatory approval for TriClip in Japan. TriClip is the first and only minimally invasive treatment option available to patients in Japan to treat tricuspid regurgitation. And in August, we received CE Mark for an expanded indication for our TAVR valve Navitor to treat people who are at low or intermediate risk for open heart surgery. This expanded indication is supported by data from our VANTAGE study which was presented as a late breaker at the European Society of Cardiology Congress.

In Cardiac Rhythm Management, growth of 13% was led by strong uptake of our lives pacemaker over, which is expanding the market and capturing share in both the single and dual chamber pacing segments. Our vision for over was to help change the standard of care for cardiac pacing and that vision is now becoming a reality with our Cardiac Rhythm Management business outperforming the market for 10 consecutive quarters and driving an acceleration in growth from high single digits last year to double digits this quarter.

In heart failure growth of 12% was driven by growth across our portfolio of ventricular assist devices and growth of CardioMEMS or implantable sensor used for the early detection of heart failure. -- and vascular growth of 5% was led by continued strong performance in our market-leading portfolio of vessel closure products and increasing contributions from a spree are below the knee, resorbable spent. In August, we received CE Mark for spree and we look forward to offering this innovative technology to people outside the United States who suffer from peripheral artery disease.

Lastly, Neuromodulation growth of 7% was led by strong performance of our Eterna rechargeable spinal cord stimulation device in international markets, reflecting both continued uptake in existing markets and launches in new markets. So in summary, we delivered another very good quarter. Our pipeline has been highly productive and continues to fuel growth and we remain on track to deliver high single-digit organic sales growth and double-digit EPS growth.

I'll now turn over the call to Phil.

Thanks, Robert. As Mike mentioned earlier, note that all references to sales growth rates, unless otherwise noted, are on an organic basis. Turning to our third quarter results. sales increased 5.5% or 7.5% when excluding COVID testing-related sales. Adjusted earnings per share of $1.30 was in line with the consensus estimate. Foreign exchange had a favorable year-over-year impact of 1.4% on third quarter sales, which was less favorable than what we forecasted at the time of our earnings call in July.

Regarding other aspects of the P&L, the adjusted gross margin profile was 55.8% of sales, which, as expected, reflects a decrease compared to the prior year due to the impact of tariffs. Adjusted R&D was 6.4% of sales and adjusted SG&A was 26.4% of sales. Adjusted operating margin was 23% of sales, which reflects an increase of 40 basis points compared to the prior year. And based on current rates, we expect exchange to have a favorable impact of approximately 1.5% on our fourth quarter reported sales. With that, we will now open the call for questions.

[Operator Instructions] And our first question will come from Larry Biegelsen from Wells Fargo.

Congrats on the quarter. Robert, back in July, you sounded comfortable with consensus sales and EPS for 2026. I'd love to hear your high-level thoughts on next year. if you're still comfortable with consensus, it seems like you have some nice tailwinds next year.

Yes, Larry. Yes, I'm very comfortable with consensus. In fact, this is a question that was asked last year in our Q3 earnings call and consensus for 2025 at that time was of 7.5% EPS growth of 10%. That's the same consensus estimates that we have today, and I was comfortable with delivering that type of growth that at this time last year, and I'm comfortable again today forecast and deliver that type of growth next year. These estimates that you referenced, they're pretty much in line with the results that we've delivered year-to-date.

And we delivered those results in a year where we faced, I'd say, larger-than-expected headwinds in Diagnostics and unexpected impact here from tariff. I think that's just a great example of of the culture we have here at Abbott. So it's just no excuses, just adapt and deliver on the portfolio that we have, we have the ability to do that. But when I think about our ability to sustain this level of performance that we're seeing in '25 into 2026, I really see it as kind of 3 key buckets of growth for us, Larry.

First of all, there's underlying momentum in the current portfolio, whether it's med tech in Established Pharmaceuticals and a large portion of our diagnostic business. And I expect that momentum to continue. We've got high-growth products here, whether it's a Vera, [indiscernible], TriClip, I'm sure we'll talk about those. So that's 1 big driver of our growth sustaining into next year.

Second one, I'd say is new product launches. We've got a lot of new product launch cadence into next year, whether it's Volt in the U.S., TactiFlex Duo, our dual analyte sensor, the new Alinity diagnostic system, biosimilars. I mean, these are whole product launches here that will add to our sales and sales growth, and that will gain momentum over the course of the year. And then as I said also, we've got, I'd say, some easing of some of the headwinds that we had this year. pretty significant headwind in diagnostic.

We talked about that, I guess, in July, over $1 billion of headwind, whether it's the VBP pricing dynamics in China this year or the decline in COVID testing. I think we'll start to see a full lapping of that next year on a full year basis, but we'll start to see some of it, quite frankly, in Q4. So I feel very confident comfortable with that type of top line growth. And if you look also why we're in this position, Larry, I mean, we made investments in 2020, 2021. These product launches that I'm highlighting here, those are investments that we made. So we'll be able to deliver the high single-digit top line growth, double-digit EPS growth, while at the same time, I'm going to remain unwavering here and the commitment to invest in the pipeline and drive growth organically.

We'll have close to 200 clinical trials across all of our businesses across a variety of different geographies next year. And within those, we're going to initiate some really important pivotal trials next year that we're funding for products that we expect are going to be significant contributors in the future, whether it's the mitral valve replacement clinical trial that will go into IDE. Our balloon TAVR trial will go into of their conduction system pacing, peripheral IVL IDE trial, a continuous lactate monitor sensor IDE trial. So we could do we can maintain this top and bottom line growth while at the same time making the investments in the portfolio that we know we need to do.

And then we've got a good track record here of expanding our gross margins and our op margins. We've got great gross margin improvement teams. We've been able to work hard this year to be able to mitigate the impact of tariffs as they have full year effect next year. So we feel good about being able to drive the top and the bottom line. The portfolio has been pretty resilient over these years. It's got nice offensive and some defensive kind of characteristics. Overall, I feel very good about the momentum we have going into -- the momentum that we have in the second half and of this year carrying into next year and just feel good about the outlook that we've got for next year.

Our next question will come from Robbie Marcus from JPMorgan.

Robert, 2 quick ones for me, 1 on diabetes, 1 on EP. Maybe first on diabetes, such an important growth driver to Abbott, beat overall driven by outside the U.S. with a slight miss in the U.S. Just given the investor focus there, I was hoping you could give a little more color on what's happening in the U.S. and outside the U.S.? And how you're thinking about the market developing, particularly in the U.S. with the key tone sensor on its way hopefully next year and what seems like increasing commentary on CMS coverage of non-intensive type 2.

Sure, Robbie. Yes, U.S. grew 19%. We didn't really have any kind of comps on that. So -- and year-to-date, the U.S. is up 25%. I think growth -- I think what you're referring to a little bit there is -- growth in the first half of the year was a little bit higher, really due to some shelf restocking dynamics that we saw. If you remember last year, Robbie, we launched Libre 3 and had significant driving demand here higher than what we had anticipated. And the manufacturer -- the new manufacturing facility we made the investment wasn't fully up and running. So that caused backorders with customers, it calls back orders to wholesalers, the pharmacy channel.

The way we had planned this year was our manufacturing site would come up and running and it would be more of a linear kind of recovery. But the factory actually did really well in the first half. So that led to customers doing some restocking earlier than what we had thought and a little bit higher, quite frankly just given the demand that they were seeing in Libre 3. So that resulted in a little bit of a pull forward of a couple of percentage points of growth. So I think it's just a little bit of a timing dynamic. I think most importantly, we remain on track with the original U.S. full year growth assumption of over 20%. So demand is still very, very strong, and we're seeing that.

To your question on kind of next year, yes, I expect to see another real strong year of growth in the U.S. with additional demand coming from the new sensor the new dual analyte sensor. I think that's going to help drive increasing penetration in that intensive insulin user segment. So I'd say there's still room for penetration internationally, I would say, in that segment. In the U.S. it's -- there's still some rum also, but I'd say that's going to really help us drive share gains whether it's in pumper -- in the pumper segment or just in general intensive insulin user segments.

The -- there's still a lot of penetration in the basal segment. I mean, I know because of the dual analyte sensor, we got a lot of attention on this insulin intensive insulin segment. But I'm still very bullish on the basal segment in the U.S., it's only about 20% penetrated today. Internationally, it's only 5% -- it's less than 5%. So I think there's still a lot of opportunity for growth in the U.S. with continued basal penetration and then not to mention the potential for CMS to cover type 2 non-insulin I think that's an opportunity. positive signs of that developing. The ADA has been very supportive of that.

I think you could probably see proposed coverage of that come out sometime next year, maybe in the first half. But then you've got -- and you know this pretty well, Rob, you got your normal timing there of comment periods, the final coverage decision when the actual date is going to be. So I think there's a scenario where that could happen next year. But -- and we'll be ready to execute, but I'm not building that assumption of that segment coming in or having any significant contributions in 2026. It's not in my base forecast for 2026. So -- but I think if it becomes a reality, I think this will be a real nice win for CMS patients.

So I think we've got a lot of growth opportunities between the patient segments, between the technology being launched across geographies. I know your question was focusing a lot on the U.S. I think we've got a great portfolio and a great lineup as we go into the U.S. next year. But I also think there's just tremendous opportunity internationally. And that's an area of particular strength for us that we built the scale, that we've built the technology and the cost positions there. So yes, I feel good about Libre. I feel good about our U.S. position and the momentum that we're going to have U.S. and internationally.

I appreciate that. And then you talked about new product launches, Volt was one that you highlighted. We're expecting that, I believe, around midyear next year in the U.S. Just maybe speak to Volt, the early feedback in Europe that you've received? And how people should think about the ramp and cadence of Volt and overall EP as we move into next year?

Sure. Well, we're seeing an acceleration of our growth rate in EP. Obviously, in the second half, we knew that was going to be the case. Second half was going to be better than the first half. And '26 will be better than '25. I think that you've seen here double-digit growth across the board, more specifically also in our ablation catheter portfolio.

So yes, I feel good about what we've done here, Rob. I mean this idea that we've been playing defense over the last couple of years, it's actually been a quite offensive strategy where we've use the adoption of PFA on other systems -- other competitive systems to increase our capital footprint, and now we'll be in a position to bring in the catheter, the PFA catheter. It's doing very well. I just got some feedback yesterday and been following the rollout. It's going very well. I'd say efficacy and efficiency, those seem to be table stakes right now. GFA has proven to work and get the job done more quickly.

So I think what I'm seeing now is longer-term durability results, safety these are becoming quickly, I think, the point of competitive differentiation, and I think Volt is going to offer a couple of areas there. I'm not the expert on all of this, but what I've heard so far has been that 2 advantages that come across loud and clear for Volt is it delivers energy in a very kind of focused direction. The lesions are broader, they're deeper, seem to be more durable and minimizes the risk of hemolysis. And then the second thing I continue to hear resounding positive feedback is the integration with EnSite is a game changer, right? That real-time contact visualization that we always talked about.

We thought that, that was going to be an important differentiation. And we're seeing that. It reduces because you've got that real time, we're seeing that it's reducing the amount of applications. And as a result of that, minimizing muscle contraction and that minimization of muscle contraction allows us to then run these procedures with conscious sedation rather than exclusively with general anesthesia. I think that's hugely important aspect, if you look at what's going on with health care systems and difficulties with general anesthesia and having that specialty ready to go at any given time. So that gives us flexibility in a lot of European markets in a lot of segments here in the U.S.

So we'll continue to roll it out internationally. And I think your timing for Volt is an okay timing for now. I mean obviously, we're going to try and target to see an earlier approval. But for that -- for now, I think that's not a bad timing to have. And -- but I think what's been clear for me over these last couple of years is just the importance of the full portfolio. And I think that Abbott has shown that it does have a full portfolio, not just of the mapping, the capital, the talent and the clinical specialists that are out in the field but also bringing in a wide variety of different PFA tools, whether it's a one shot, whether it's going to be a focal PFA through our TactiFlex that we expect to get approval in Europe next year. And try frankly, has been increasingly clear to me that the companies are going to need more than just PFA. You're going to need to have PFA and you're going to need to have LAA. So -- and we've got both of those. So I don't think it's a question of Abbott being late. We're right on time, and we're complete with the full portfolio that we need. So I expect EP to do much better in '26 than what it did this year. And I think this year has done pretty well, too.

Our next question comes from David Roman from Goldman Sachs.

I wanted to switch gears a little bit on to the Diagnostics business. I mean clearly, a lot of focus this year on some of the discrete headwinds that you faced around China VBP and DRG update, the dynamics of the USAID and COVID testing. I think you made clear in your comments around '26 an expectation that those headwinds start to moderate. But could you maybe talk a little bit more about some of the underlying drivers of the business and how you think about an overall acceleration in the Diagnostics business going forward?

Sure. I don't think the dynamics that we've been talking about, David, have changed. And I don't think that's a bad thing to be quite honest with you because it just shows that I think we've got a handle on kind of the headwind that we've been facing which was really the VBP in the diagnostic area. I think one of the things I talked about different from other VBPs that we've seen in China is that usually if you won a VBP kind of tender, you have a price hit, but then you've got a volume offset. I think you just raised there.

One of the challenges we've seen in this segment specifically is you had to price it, which was the majority of our headwind, but you also saw some changes in the DRG model that has impacted volume a little bit also. So I was actually in China last week, I spent a week there. I was over there over the weekend 2. I had an opportunity to really go in depth with all the different stakeholders. I think the team has done a really good job at navigating this. And I think that if you look at some of the dynamics that we're seeing in some of the accounts, we're starting to see a little bit now of some of that volume start to repick up. I'm not going to say that it's fully back, but I'm encouraged to see some of the signs start to pick up in terms of volume there.

And if you look at how that happens to us, it really started happening in Q4 of last year. So we'll start to see a little bit of that headwind kind of that comp start to start to be minimized in Q4 this year in China. And then next year -- like I said, we've made changes. We've brought in new products, new management teams, et cetera, and I feel good about what I saw there last week, David.

So I don't think that, that's changing. And like I said, I think that's not a bad thing. We'll be lapping all of that, and we're seeing nice progress there from the team, too. I do think that the aspect that is changing is we are seeing our business outside of China continue to accelerate, and that's going to be the other dynamic here to be able to move our diagnostic business from being kind of low single-digit growth and now kind of mid-single digit, mid- to high single-digit growth next year.

U.S. has done incredibly well. I give a lot of kudos to the team there. They were up 10% this quarter. and that's driven by a lot of new business capture. So again, the portfolio is very competitive. We got a large number of new business that we acquired last year and continue to see new business converting to Abbott this year. So I think share gains in the U.S. is really what's driving that. European region did very well to this quarter. I think they were up 6% to 7%, and they're doing very well also. And then Latin America, for us is growing mid-teens, consistently growing mid-teens here also.

So I think the dynamic is not changing. So we're not seeing the situation get hit worse in China. And I think the team is doing really well there, and we'll be out of that next year. And outside of China, I think the dynamics are going exactly how we've expected them to go, which is Alinity is being rolled out. It's a very competitive system. The teams are hitting their stride here in various important geographies. Like I said, I expect that to continue. So you put that combination together, David, of passing the headwinds of the VBP in China and continue acceleration in the -- in all the other geographies. I think diagnostics is set up for a nice recovery year next year.

Very helpful. And maybe just 1 follow-up here on the P&L. I think in the gross margin line, there are probably a lot of moving parts this quarter around the first quarter burdening the impact of tariffs. And then also probably some foreign exchange-related dynamics on the significant move in the euro, for example. Can you maybe help us decompose a little bit to the operational performance in the P&L from some of those other factors and how we should think about margin trajectory on a go-forward basis?

Yes, I'll ask Phil to take that one. Phil?

Yes. Thanks, David, and I think you touched on the right elements there. Gross margin continues to be a key area of focus for us. We've spoken in the past of the dedicated teams that we have each of our business that drive the constant ideation and execution throughout our supply chains and operations even our affiliates, and that's progress that we continue to make good traction on here. the step back that you referred to here in Q3 sequentially, certainly reflects a normal pattern that we have more of our Platt operational maintenance shutdowns that occur in the third quarter. And so that's a normal sort of phenomenon.

Also, as you touched on, the first meaningful impact of tariffs that we're feeling in gross margin is in the third quarter there as well. I would say we've done a really nice job in terms of the team that I chartered to work on tariff mitigation. And so we continue to make good progress there and implement ideation not only on how to improve that impact going forward. But also the team is generating ideas to pass over to the gross margin expansion teams. And so to feed that funnel.

And I think we are kind of on track with year-to-date 60 basis points of gross margin expansion and comfortable that, that pattern will continue here and kind of maintain that sort of 57% outlook and the profile going forward.

Our next question will come from Josh Jennings from TD Cowen.

I wanted to circle back on the EP franchise and the outperformance in 3Q. Sorry to get a little bit granular, Robert, but I was hoping you could just help us better understand the drivers of the double-digit ablation catheter growth one? And then sorry for a report question, but hopefully it will be pretty easy to digest.

Second, it's just -- I think the consensus for you is that Abbott's mapping franchise has been driving the double-digit growth this year to date. Maybe just help us understand, is there a competitive environment and mapping evolves, how do you see the mapping franchise performance in 2026?

And then just lastly on the third part, where do you -- where does Abbott's see PFA penetration in the U.S. and OUS by the time Volt's launched globally. So I guess in 2026, do you think we could be north of 80% in the U.S. and a little bit lower than that OUS.

Sure. Let me see if I can kind of go through all of them here on this. I think the first question was just what's driving the ablation, the double-digit ablation growth. That's significantly driven by international as you probably would have expected, Josh. So a big driver there has been that. But we've got good growth, good mapping growth in the United States still. So we still believe that we're -- the data shows that we're still market leader in mapping cases. Obviously, with other competitors launching their mapping systems. We've seen an uptake in their mapping in their -- in the amount of cases that they're now mapping tied to their own catheters but even with that, we still feel that we've got a leadership position in the amount of PFA cases that we've mapped.

We have added other products also that help drive our growth there. Again, this goes back to this understanding of all the different segments in the EP area. Yes, ablation catheters are important. They're a big segment of the market and so are diagnostics. But we've got other parts of the portfolio also that are driving growth. We recently launched our 13 [ French Agila sheet ] which is viewed as 1 of the 1 of the best introducer sheets for not only our product, but even for competitive systems also. So that helps also. We're launching ICE also. So that's also a driver.

So I think, again, going back to my comment, you got to have a whole portfolio here. And I think trying to pin it down to like is it mapping, is it this? Yes. I mean, obviously, we're tracking all those different segments, Josh. But we kind of view it as looking at the amount of cases that we're doing and looking at it on a revenue per case, and our revenue per case is actually going up as we're introducing more and more new products to support those cases.

So -- and then I think your last question was about penetration of PFA. It seems like it is becoming the go-to energy source here. I think the numbers that you threw out there. sound reasonable. If you think about 2026, you'll now have all 4 manufacturers with PFA ablation catheters with mapping systems tied to patient catheters. So I think that number sounds reasonable to me. And then internationally, it's a little bit less, but we'll see. We'll see what will happen. I think that Volt could actually change that dynamic internationally in maybe it can lead to a much higher penetration rate in international markets, specifically in Europe that mimics the U.S. penetration. But that's not a bad assumption to have for now.

Our next question will come from Vijay Kumar from Evercore ISI.

I had one on maybe high level on China, right. I know there is -- outside of VBP, I think some macro issues are challenging volumes, right? So when you look at overall China, inclusive of diagnostics in MedTech and EQ franchise, can you just remind us what China has done for you year-to-date? What was it last year? What is your view on normalized growth outlook for China? I think 1 of your peers just said that they expect a mid-teens organic growth outlook for China. I'm curious to hear your view on China.

Yes, sure. I was there last week, like I said, it's an important market for us, and it's going to continue to be an important market. But as the company has grown and portfolio and it's its participation in our total revenue as a percent of total revenue has come down a little bit, right? So if you look at that China let's say, 10 years ago, Vijay, it was probably close to like 9%, 10% of total Abbott revenue. Today, it's less than 6% but it doesn't mean that it's not an attractive area of the world for us to continue to invest in and drive to.

If you look at our EPD and nutrition businesses. Those 2 businesses have been up double digits year-to-date. And the team has done a really good job there about building the portfolio and taking advantage of of the growing segments there that we can offer innovation and solutions there. Our cardio neuro business has actually seen sequential growth step-up throughout this year. So I think if you take out the real challenge for us has been, obviously, the diagnostic piece. And that was one of our larger businesses in China before the VBP.

So Q3 decline was pretty much in line with what we saw in Q1 and Q2. So -- but if you remove that, I'd say our growth rate in China is around 5% to 7% if you take out the diagnostic piece. And I think that, that's probably not a bad place to be in. And as we expand the portfolio there, bringing new innovations, I think that, that's probably a good growth target that I look at for 2026.

I don't know who you're referring to is talking about mid-teens. If you've got -- if it's a company that doesn't have a lot of business, then yes, then you've got opportunities to grow your position. We've got a lot of business in China. And I think that a growth rate of mid-single digits, at least how we're planning for is how we built -- how we're looking at our 2026 and quite frankly, as we look kind of going forward. So and placing a lot more emphasis on growth contributions from other geographies, I think we've got a lot more opportunities than over here. But again, like I said, still remains an important market for us, and we're committed to it.

That's helpful. And then maybe 1 quick 1 on Aveir. I think CRM is kind of your fastest-growing product line within medtech. And that's kind of crazy when you think about diabetes and all the other things that's happening. Can you remind us on how big is this category, the dual chamber needless pacemaker? And where are we from a penetration standpoint, what innings are we in?

Yes. I'm going to pick up on it's kind of crazy comment that you made. For us, it's actually taking a vision that we had, like I said in my opening comments, to change the standard of care here. make the investment that's been done. And I think now we're seeing the benefit. It's fundamentally changed the growth trajectory of our business. I'd say 5 years ago, our CRM business was flat, flat business, then it moved to mid-single digit, high single digit and then this quarter hitting double digits. it's pretty remarkable also, I would say, given the fact that this has historically been a low growth market.

So we're obviously taking market share. I give total kudos to the team in terms of how they went about this. all the way from R&D, operations, clinical and commercial, I think they've done a really good job. And I think Aveir is just now really hitting its stride and we're driving uptake in both single and dual chamber. I expect this to continue.

I expect this type of performance to continue for the next few years. They've established a very large base of U.S. physicians that are now implanting this. I'd say on the single chamber, we're probably about 50% penetrated. And so there's still room to grow there. But half of our implants so far have been dual chamber, and we're probably sub-10% penetration over there. And those penetration rates are mostly U.S.

So I think there's a lot of opportunity here for us to do this and to live up to that vision. We've got great opportunity international, too. We're seeing really nice momentum in Europe and Japan. And I think the long-term aspiration here is to be able to convert a significant portion of this market. We estimate the low-voltage pacing market to be around $4 billion. We want to convert a significant portion of that and in doing so, become the market leader in this segment. So -- and the team has done a really good job and there's pipeline. There's innovation, there's clinical work, there's investment behind it.

So I've got -- it's not crazy to think about it if you look at all the work that the team has done and put forward. And I think they're ready to capitalize on this, and they've got they have pretty high aspirations of where they want to take their sales and their market position.

Next question will come from Danielle Antalffy from UBS.

Robert, I wanted to touch on the 2 questions, 1 on diabetes, 1 on structural heart. Just wanted to touch on the structural heart piece of the business. And specifically in left at rail appendage closure and how you guys are thinking about that has been a high-growth market. It feels like you guys might not really be benefiting yet from the concomitant procedure. Maybe you could talk a little bit how you see left atrial appendage closure evolving for Abbott specifically in 2026 and beyond? And then just 1 quick follow-up on diabetes.

Yes, sure. Listen, I think it's a really important area of growth. You're right. I don't think that we've taken the right amount of share with concomitant I know that the teams are looking at how to do that more effectively as we go into beginning of next year. But this is an area that we continue to invest in. I think that what I'm seeing right now from the results or at least the feedback that I've heard from physicians on our next-generation Amulet device is significantly positive versus what I've heard from other products that we put into trial.

So when I get calls and texts and things like that from some of the KOLs that are working on the trial, really making sure that we understand how competitive and how good this next generation is, I think that's going to allow us to do that. We've actually completed the enrollment of that trial. So we're going to be filing. We got to do the follow-up and then we'll be filing in the first half of next year. So we'll see if this is a 2026 launch or if it's more of a 2027 launch, but I think that's going to be hugely important. And I think it's going to be a huge and important as it relates to our full portfolio here.

We think that it's going to be a differentiator for us to be able to have not only all the PFA tools and mapping tools and service and support, but now to be able to add a much more competitive device on the LAA side. We've got a readout of our trial against NOAC, that will be in 2027. I understand that there will be a readout from competitive system next year. But I think that this is high-growth area and 1 that's got a lot of attention for me and from the management of our device teams on how we can kind of leverage the portfolio better. So I've got high expectations as we go into next year and especially with the next-generation product.

Got you. And then just a quick question on diabetes. We've talked in the past about CGM becoming standard of care. And I'll be very honest. It surprises me that we're still only 20% penetrated in the U.S. and basal, what do you think are still the barriers to this? And how long will they persist? I mean you talk to clinicians, and it feels like the momentum is there. And quite frankly, we should be inflecting at this point. And I just can't tell if we are. So just curious what you think is maybe preventing that or maybe you think we're in the inflection, I don't know. I don't want to speak for you, but just if you could comment on that.

Yes. I think it's difficult to generalize. Every market that we see on the basal has gone at different speeds. If I look at some of the key European markets where we got full basal, it's actually gone, I would say, maybe at 3/4 of the speed that the intensive insulin user kind of got picked up.

And you're right, the U.S. is a little bit slower. I think a large universe of primary care docs that needs to be covered. There's probably more awareness that needs to be built. I know you might think, well, there's just already a lot of awareness, how come it's not extended, but there's still a lot of pockets around this country where we're going in with our sales force for the first time. And there's a very high level understanding of what CGM is but there hasn't been a lot of experience.

So that's what we're working on. A lot of sampling programs. I think the work that we did, that the team did for Epic integration in a more turnkey versus every different office doing their own integration. So to have it fully integrated into Epic. I think that will be good. And I think the other thing that is going to be important for the primary care doc, I mean, these are very fast visits, Danielle. They don't have a lot of time. So I think they're starting to really understand the benefit of using ambulatory glucose profiles and look at those and be able to find out where the problem is in that basal population. It's 20%. It's there are probably pockets of the United States where I've seen higher penetration rates, but that's okay.

I think that what's important for us is that we're continuing to see an increased sustained penetration. And I think that if I were to sum it up, it's probably more dependent on us than it is about concerned about whether there's value or not value. I mean I think the clinical data is pretty resound in terms of the benefit that it has. So this for me is just more about us. doing better, investing more, covering more physicians, and that's what we're doing.

Our next question will come from Joanne Wuensch from Citi.

Two quick questions on Nutrition [indiscernible] front. Could you give us an update, please, on where we're sitting on the net litigation. And then it looks like there were some pockets of nutrition that were weaker this quarter than we would have expected. And if you could just sort of address that and how you think about that going forward, that would be great.

Yes, sure. On the litigation, as I've done in the past, I'm not going to comment on any deep into any specific cases. I think you saw over the last couple of months, you saw some of the federal cases go through the process in both those cases Abbott won on summary judgment. So we stand behind. I mean I'll just stand behind the products. I stand behind our label and the importance of these products in the health care system.

So we'll see more cases progress this year and then into next year. There's clearly a difference in terms of how the federal cases are being looked at versus maybe some of those earlier cases on the state are being looked at. But we remain committed and we'll commit to defending the product and defending the use of it going forward.

I think comment was pockets of softness in Nutrition. I'd say for me, the -- I think if you look at the 4% growth, it's pretty much in line with our kind of historical growth rate. I think the one that was a little bit off where we historically had been with on our U.S. pediatric. And that's -- I mean, that's just a competitive impact. We gave back some share that we had captured last year when a competitor experienced a supply disruption.

I knew it was going to be difficult to hold on to it, to hold onto it permanently, but still I'm disappointed that we saw that happen. And then on top of that, we also saw a large WIC contract, state contract move from Abbott to a competitor in the quarter. So that had an impact over there. I expect some of these share losses here that we've seen in the U.S. to impact our growth rate here in the U.S. pediatric for the next couple of quarters.

But what I'll say is we face this during the supply disruption in 2022, and we got our share back. It takes a few quarters, but I'm very confident that the team will be able to do that first because we recently won 2 new WIC contracts. The combination of those 2 contracts actually are higher than the 1 that we lost, but those go into effect Q1 and Q2 of next year. And then we've got several new product launches that we'll be launching here in the U.S. over the next couple of quarters. So it's going to take a couple of quarters, but I'm confident we'll be able to get our share back.

Our next question comes from Travis Steed from BofA Securities.

I guess, kind of big picture, I wanted to talk about the sustainability of the device business. You've had kind of 10-plus quarters of double-digit growth. Just trying to think about the sustainability of that going forward when you think about the procedures and underlying procedure market growth in the pipeline that you guys have. I just want to think about your view there kind of longer term.

Yes. I mean I think the way our device portfolio has evolved, if you look back 5, 6 years ago, it was a high single-digit grower in the combination, it was really you had double-digit growth in diabetes and EP and structural heart. And then you had say about -- it was about 40% of our revenue in vascular and CRM that was relatively flat. So the way we've done this, and I've talked about this also is, okay, how do we ensure that the high-growth areas continue to grow and accelerate, and that's what we're seeing in structural heart and EP and diabetes, even in heart failure.

And then how do we reposition what we would characterizes historically slower growth segments of a very large portion of our portfolio, how do we get them from being flat to at least growing mid-single digits. And if you get them to grow mid-single digits, then you move up to double digits. And that's what essentially has happened. If you look at our CRM business, I talked about this -- it's gone from being flat to now being double digit. That has a tremendous impact, and I think that there is a lot of sustainability in that. And then in our Vascular business, we started to reposition the portfolio.

I would say [indiscernible] is on the same journey that CRM was on maybe a year or so behind them. But we're already seeing the impact. We've been able to show pretty consistent delivery of 5% to 6% growth in our vascular business over the last year or so. So I think they're on their kind of journey to reposition the portfolio to higher growth. So my expectation is it is very sustainable. We're in these very high-growth markets. We have great portfolios. We've been investing significantly and disproportionately in those programs in product development, clinical trials. And so I think it's very sustainable.

Great. I wanted to follow up on some of the balance sheet and M&A, kind of a lot of cash in the balance sheet, how are you thinking about the portfolio over the medium term? Do you have the right assets going forward in the new markets you want to be in. At some point, are we going to see you guys kind of utilize the balance sheet and the cash.

Yes. Well, we have been using it. We have been using it in terms of dividend and growing our dividend. We have been using it in terms of share buybacks. We've been using it in terms of debt and debt paydown. We've got billion of debt to pay down next year. And I think I prefer to pay that down when it comes due, but we'll wait what interest rates look like. So we have been using it. We've been making investments, internal investments with manufacturing and some of our digital solutions. So yes, I don't think that we've just been sitting on it. Obviously, we've got businesses that are very strong positive cash flow generators.

On the M&A side, yes, I talked about there being opportunities, very good opportunities out there. We've got a strong organic pipeline, which allows us to be a little bit more selective. But there are opportunities that strategically, and there are a lot of opportunities that fit us strategically and make and can generate an attractive return. We've got capacity to do that, too. So I like the position we're in, but we are putting our cash to use.

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

And our last question will come from Suraj Kalia from Oppenheimer & Co.

So Robert, Structural Heart continues to be an important segment for Abbott and you talked about some of the new products on the horizon, balloon expandable valves, [ Cephea ], so on and so forth. Would love to get your thoughts specifically on the mitral and tricuspid U.S. TAM. The landscape seems to be changing with SGLT2 inhibitors, cath lab capacity and so on. What are the puts and takes for realizing this TAM.

I mean I think there's a lot of opportunity in those 2 products that you just referred to. I think on the tricuspid side, I'd say what needs to be done here is continue to invest in data and data generation to be able to strengthen the referral pathways to be able to have broader adoption. I think between repair in place. It's good to have both those tools. Right now, what I'm seeing is repair is being the preference just given the safety profile.

On the MitraClip side, we've invested in a clinical trial to look at using MitraClip in low intermediate risk patients. So I think for those 2 products, you're going to have to continue to invest in clinical and clinical evidence. Obviously, you support that with your field-based teams, et cetera. But I think the real big drivers of and continued drivers of that are going to be clinical evidence.

But I mean, I take a step back here and maybe just look at how you started your question about Structural Heart. You went quickly into those 2 products. But this is an area that -- in my view, if you want to be a cardiovascular med tech leader, you have to have a strong, robust and differentiated portfolio and strong position in structural heart.

If you look at the revenue across the players, we -- last year, I think we crossed over to #2, so we have a #2 position. And I don't think that's by accident. We've invested in that area. We've invested heavily in that area. We've got a portfolio grade products. Yes, MitraClip, TriClip, you got Navitor you got to Amulet. And you've got several -- if I look at over the next couple of years, there are multiple catalyst here to sustain and even accelerate this double-digit growth that we got, whether it's label expansions and Navitor, MitraClip. We launched our fifth generation MitraClip and TriClip product. That's important.

We've seen the guideline changes happen. You saw some of that guideline change happen in the European conference about a month ago. expanding the product and the technologies to other markets. I think the launch of TriClip in Japan is going to be a real important move for us. We've done some bolt-on M&A in this space also. This quarter, we actually bought an AI-powered imaging software company in Europe that specialize in individual cardio pre-procedure planning. I think that's going to be hugely important in this space. So we've added to that and integrating that team into our programs.

And then the pipeline, like you said, whether it's balloon TAVR, Amulet our next-generation able and our mitral replacement valve, I think those are all -- I actually have been pretty close -- I've been closer to the mitral replacement program. recently. And the feedback that I've heard from this product is just spectacular. And I think it's got the potential to live up to the expectations that we all had back in 2015 when all of us made significant investments in buying early assets and with the belief that mitral could be as big as TAVR. I think that this is the product that's going to it's got the potential to fulfill that promise.

So I put all that together, I think that we're in a tremendously competitive position in structural heart portfolio is very complete and we're going to continue to invest in it and be a leader here. So I feel good about that part of our med tech portfolio and be able to kind of sustain that double-digit growth going forward.

So well, I realize we've hit our time here. Let me just make some closing remarks, delivered another very good quarter. Year-to-date, we delivered 7.5% organic growth, 10% EPS and shown that we can expand our op margin profile. We've expanded that by 100 basis points. And I think we've delivered all of that, as I said in one of the questions here with some larger-than-expected headwinds here that we faced in our businesses that we feel will be kind of behind us next year. So our organic R&D engine continues to be highly, highly productive. And I expect that we'll be able to sustain this performance, this growth as we carry into 2026 and beyond. So with that, I'll wrap it up, and thank you for joining us today.

Thank you, operator, and thank you all for your questions. This now concludes Abbott's conference call. A webcast replay of this call will be available after 11:00 a.m. Central Time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us today.

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