Abbott Laboratories Aktie

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.

Good morning, and thank you for standing by. Welcome to Abbott's Second 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; Philip Boudreau, Executive Vice President, Finance and Chief Financial Officer.

Robert and Phil will provide opening remarks. Following their comments, we'll take your questions. Before we get started, some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2025.

Abbott 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.

At the halfway point of the year, we are on track with our key priorities and objectives. In the first half, we delivered high single-digit sales growth over 100 basis points of margin expansion in both gross margin and operating margin, double-digit earnings per share, and we achieved a number of important milestones related to advancing key programs in our new product pipeline.

Our sales growth excluded COVID testing sales, was 7.5% in the second quarter and 8% in the first half of the year. Our second quarter adjusted earnings per share of $1.26 and exceeded the consensus estimate and reflects 11% growth versus the prior year and 16% growth on a sequential basis compared to the first quarter.

I'll now summarize our second quarter results in more detail before I turn the call over to Phil, and I'll start with Nutrition, where sales increased 3.5% in the quarter. Growth in the quarter was driven by 6.5% growth. In Adult Nutrition, where Abbott is the global market leader, we continue to see strong demand for our Ensure and Glucerna brands in the markets around the world, and this growing demand is driven by consumers seeking a source of complete and balanced nutrition, especially for those focused on protein-rich diets and meeting the dietary requirements for managing diabetes.

Moving to Diagnostics. Sales declined 1.5% in the quarter, predominantly due to the year-over-year decline in COVID testing sales and the impact of volume-based procurement programs in China. Together, these represent a projected headwind of around $700 million or 750 basis points on the full year 2025 sales growth in Diagnostics. Excluding China, Core Lab Diagnostics grew 8%, reflecting strong underlying demand in the markets around the world.

Turning to EPD. Our sales in nearly 8% in the quarter, driven by strong performance in our key 15 markets, which surpassed $1 billion in quarterly sales for the first time. Key 15 markets include India, China and other markets across Asia, Latin America and Middle East. These markets represent the most attractive areas of growth for branded generic medicines.

The growth in these markets is supported by favorable long-term health care economic and demographic trends, including higher birth rates, and expanding middle class aging populations and growing demand for access to high-quality health care solutions. We serve this growing demand by offering a broad portfolio of branded generic medicines tailored to local conditions with a focus on key therapeutic areas. And additionally, we continue to make good progress towards building a best-in-class portfolio of biosimilars having completed 10 regulatory approval submissions across a range of emerging markets with launches projected to begin in 2026.

And I'll wrap up with Medical Devices, where sales grew 12%, driven by double-digit growth in diabetes care, heart failure, structural heart, electrophysiology and cardiac rhythm management. In Diabetes Care, sales of continuous glucose motors were $1.9 billion in the quarter and grew 19.5%.

In April, we announced a first of its kind collaboration with Epic, enabling direct integration of Libre sensor data into the leading electronic health record system. This seamless integration allows health care providers to easily view their patient's glucose data before during and after meeting with patients, supporting our goal of simplifying care to help deliver better outcomes for both health care providers and patients.

In electrophysiology, we had several key accomplishments in the quarter, including delivering a number -- delivering another quarter of double-digit sales growth initiating the launch of our new Volt PFA catheter and completing enrollment ahead of schedule in our [ PACTAFLEX-DUo ] U.S. pivotal trial.

In Structural Heart, growth of 12% was led by a combination of continued share gains in TAVR, strong adoption of TriClip and contributions from Amulet and MitraClip. During the quarter, we achieved several important milestones that demonstrate our commitment and progress toward expanding our portfolio of solutions to treat mitral valve disease.

As the leader -- as the market leader in mitral valve repair, we continue to invest in the success of MitraClip. So in addition to currently pursuing a label expansion to increase the addressable market, we recently launched a next-generation version of MitraClip, that further enhances the procedure with improved deployment and deliverability.

And to accompany our leading position in mitral valve repair, we expanded our focus several years ago to include the development of mitral valve replacement technologies. And in May, we announced FDA approval of our Tendyne mitral replacement valve, which offers a new treatment option for those who are not candidates for open heart surgery or mitral valve repair procedure.

And at New York [ Valves ] conference a few weeks ago, we provided an encouraging update on the development of our new [ transfemoral ] mitral valve replacement product. We acquired this innovative technology as part of our venture investments program, which led to the acquisition of Cephea Valve Technologies in 2019.

And following that acquisition, we continue to iterate and enhance the technology and the FDA recently granted breakthrough designation. We plan to start the pivotal trial next year and look forward to creating a new solution to help treat the world's most common heart valve disease, which impacts the lives of millions of people around the world.

In Rhythm Management, our strong performance is a result of our strategy to build a comprehensive portfolio capable of significantly outperforming the market on our own historical growth rates. Our growth this quarter of 10% was led by strong uptake of AVEIR, our innovative leadless pacemaker, which is driving growing adoption of leadless pacemakers in both the single and dual chamber pacing segments of the market.

In April, we announced late-breaking data from the AVEIR conduction system pacing feasibility study. This was the first study to evaluate using a leadless pacemaker to deliver a conduction system pacing which is a novel approach to pacing that closely mimics the heart's natural electrical rhythm. And following the successful outcome of this study, we are targeting to start the pivotal trial next year.

In our heart failure business, often overshadowed by other high-growth businesses in our Medical Device portfolio, sales grew 14% in the quarter. This was driven by balanced growth across the portfolio, which included double-digit growth in ventricular assist devices used to treat both chronic and acute conditions, and double-digit growth in CardioMEMS, our implantable sensor for the early detection of heart failure, and vascular growth of 3.5% and was led by double-digit growth in vascular imaging and vessel closure products and increasing contributions from [ sprit ] are below the [indiscernible] and lastly, in neuromodulation, growth of 4%, was led by strong performance of our alternate rechargeable spinal cord stimulation device in international markets, reflecting both continued uptake in existing markets and launches in new markets.

So in summary, our diversified model continues to provide a strong foundation that is both resilient and designed to sustainably deliver top-tier results now and in the future. And that's evident in our performance in the first half of the year, which, along with our outlook for the remainder of the year and the momentum heading into next year aligns with our long-term sustainable growth objectives of delivering high single-digit growth, healthy margin expansion and double-digit EPS growth. I'll now turn over the call to Phil.

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

Turning to our second quarter results. Sales increased 6.9% or 7.5% when excluding the COVID testing-related sales. Adjusted earnings per share of $1.26 increased 11% compared to the prior year and was above the consensus estimate.

Foreign exchange had a favorable year-over-year impact of 0.5% on second quarter sales. During the quarter, we saw the U.S. dollar weakened, which resulted in a favorable impact on sales compared to exchange rates at the time of our earnings call in April.

Regarding other aspects of the P&L, the adjusted gross margin profile was 57% of sales, which reflects an increase of 100 basis points compared to the prior year.

Adjusted R&D was 6.3% of sales and adjusted SG&A was 27.7% of sales. Adjusted operating margin was 22.9% of sales, which also reflects an increased 100 basis points compared to prior year.

Based on current rates, we now expect exchange to have a relatively neutral impact on our full year sales, which includes an expected favorable impact of approximately 2% on our third quarter sales. And lastly, for the third quarter, we forecast adjusted earnings per share to be in the range of $1.28 to $1.32. With that, we'll now open the call for questions.

[Operator Instructions]. And our first question will come from David Roman from Goldman Sachs.

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

Sure, David. I guess I'll just start off with like our goal is to always ensure that every one of our businesses is meeting and beating, right? The reality is in the portfolio of Abbott and complexity and the broadness that we're geographically across the different types of products. You're going to have some businesses that will fall short time to time and others do better and we've seen that time and again.

The goal here, David, is always to really take all of that, all that complexity and just translate into reliable and sustainable growth. And that's what we've been doing this year. So when you say characterize your growth this year. Listen, we've got a device business that for the first half of the year has grown over 12% double-digit growth in a lot of our businesses, our pharma business, has done very well, 8% growth in the first half, building the biosimilar portfolio [indiscernible] attrition first half about 5%, which is in the range that we've always expected them now that we've lapped a lot of the market share kind of recovery process here.

So really, the challenge that we've had is twofold here. It's really drop-off on our COVID testing sales and some challenges in the China core lab market together with some changes that we've seen in the [ Eurosport ] funding for HIV testing. So you -- you look at that and say, okay, I'm not sure these are impacts that are 100% definite in the second half of the year, but I'm not going to sit here and try and kind of forecast what COVID testing is going to do.

We had expected to see a China recovery in volume. We knew the price impact in China Core Lab, David, and we rolled that into our guidance. We had expected a market volume recovery to start happening in quite frankly, starting in Q2. We haven't seen that. So we've moved that out into [ Q4 ].

But you put all that together, it's -- together with the -- with the funding for HIV testing, that's over $1 billion of I guess, a headwind. And even with that $1 billion, we're still forecasting high single-digit growth and absorbing the impact of tariffs, which we now expect to be just $200 million of impact.

FX, as Phil kind of said in his comments, is still a headwind versus prior year on the EPS side, but much less of a headwind than what we originally kind of anticipated back in January and quite frankly [ people], too. So that helps offset some of the tariff impact.

So I put this all together, and you got -- it will be nice, David, to lap these to see these headwinds behind us next year. And then as you look to next year, you got all this great launch activity across all the businesses, whether it's Vault in the U.S., [ TACTIFLexDuo ] internationally, the dual analyte sensor, the launch of the new Alinity system the biosimilar kind of rollout.

So I look at all of that and I say, okay, you've got this headwind that we're facing here. Still we're committed to high single-digit growth and double-digit EPS growth. And then as you look into 2026, those headwinds aren't going to be there. And then you've got all this kind of great momentum, which I'm sure we'll talk about in other parts of the business.

So I look at 2026, I look at -- I know what the consensus are. They look very reasonable to me in that range of high single digits, double-digit EPS. It's in line with our historical growth. It's in line with the guidance we've given this year, and it's in line with what our long-term sustainable growth targets are.

So yes, it will be good to see these elements here that I've just kind of highlighted that are specifically to diagnostics. And I'll just take it a step further here. I mean if you look at our -- and I mentioned this in the opening comments here, our core lab business outside, and I hate doing this, but I think it gives context.

If you look at the U.S. was up 7%, 8%. The European region was up 8%. Our Latin America region was high teens. So our core lab business is very well. Alinity is doing very well. We just got this issue that we're going to have to go through this year as it relates to VBP and the disruption that happened in our core lab business in China. But we're still very bullish on this segment. We still believe it's a very important part of the health care system. So like I said, looking forward for these headwinds to be behind us and we're well set up for next year.

That's very helpful. Maybe just push a little bit harder on one point there. If I look at the guidance for this year, it's really kind of 8.5% when you take out some of those onetime headwinds.

One thing you didn't mention was -- obviously, in EP, you faced a little bit of a portfolio gap this year, and that looks to fully resolve as you head into the back half of the year and into next year. So is there a scenario in which we could see some of these onetime headwinds reverse and see the growth rate accelerate into 2026 and [indiscernible], do you see that fall through to the bottom line, recognizing it's early to talk about '26, but just conceptually some of these headwinds fading and some of those pipeline drivers starting to kick in more significantly?

Yes. Listen, there's definitely a scenario where you could see that growth rate accelerate, right? I mean it's a little bit early to kind of put a full stop on that. But there's definitely opportunities across the portfolio, which we'll talk about likely that said, hey, this -- you mentioned electrophysiology. I mean that's been one part of our portfolio that has consistently kind of exceeded the expectations, both expectations, quite frankly, that you guys have had and the expectations that we've had.

So yes, I mean, there's definitely opportunity as these reverse out to see that acceleration. Maybe a little bit early to say that. But right now, in terms of where we're sitting for '26, I feel very comfortable with that.

Our next question will come from Robbie Marcus from JPMorgan.

Two for me. I'll ask them both upfront, both product questions. Diabetes and EP, both performed really well in the quarter, particularly U.S. Libre, it was good to see U.S. double-digit EP. Maybe just walk through some of the trends you're seeing in each of those product lines, especially in diabetes, there was a lot of buzz around [ keytone ] integration and that product coming from Abbott. So what are you seeing in diabetes? And then also EP, especially now with [indiscernible] outside the U.S.

Sure, Robbie. Yes, another great quarter of Libre, almost 26% in the U.S., an acceleration internationally. Also, I think all 3 months we're seeing great momentum. So if you look at intensive -- the intensive insulin user segment, obviously, that's been a key growth driver for the market. But there are still segments there that are underpenetrated, and we're seeing nice growth in there. And the new sensor you referenced, I think, is going to definitely accelerate there.

The [ basal ] segment is doing very well. A big growth driver for us still market leader here. Our view globally is we've got about a 70% share you know some of the markets that have kind of began reimbursing for basal, Robbie. We're starting to see more markets go down this path and start reimbursing basal, whether it's like specific tenders and regions or different parts of health care systems. So that's good, and we see like sustainability to that growth rate and our position in those international markets.

And then the noninsulin user segment is doing very well, very nicely too. I mean I think right now, you've seen commercial coverage here in the United States. I'd say round about 30% is what we're seeing, and that's doubled over the last 3 years. So I think the trends are doing very nicely there. And can see that continuing for the foreseeable future as part of our road to $10 billion in revenue.

Your question on -- or at least your comment on the dual analyte sensor, I think this is going to be, I think, a real next level, kind of, I'd say, significant change in the CGM market, specifically for the intensive users. [ Key tone ] monitoring helps prevent diabetic ketoacidosis. We have a legacy of being in that. We were the first company to develop a blood test, a rapid blood test for that many decades ago. So we know how important it is. It could be life-threatening.

The ADA conference you referenced, I thought there was some interesting clinical data that showed it was 30% of pediatric patients and 40% of adult participants saw like -- in this trial saw like increased [ keytone ] levels that put them at risk if there was an interruption on insulin delivery. So there's clearly a need for this patient segment. I think you saw that all the announcements that came out during the conference with all the pump integration. So there's clearly a need there. It's understood.

And an opportunity to expand even further, we know that key tone monitoring here is going to create a path for doctors to prescribe SGLT2s for type 1s. These are great drugs that offer a lot of cardiovascular benefits, but they come with a [ DKA ] risk. So we think that's going to have a huge opportunity, too.

So good trends in the existing segments right now, Robbie. And I think that our position is just going to be strengthened even more as we bring out the innovation. And so looking forward to that.

I think on your question on EP, yes, we saw good double-digit growth in EP this quarter, double-digit growth last quarter, saw an acceleration in the U.S. growth rate this quarter versus last quarter. and a lot of attention now shifting towards rolling out of Volt to the international markets.

We tend to like -- we like to launch our products in a more kind of limited fashion. So when you move from clinical trials to full out launch, we like to have this little period in between here, Robbie, where we get to just put it out in a little bit more of an environment that we can just make sure that we're clearly understanding and getting all the feedback in a more direct fashion. And when you go a little bit more focused, you get a great opportunity to do that.

So really focusing right now on the sites that were that were enrolled in our trials, and the feedback has been excellent. I think that it stacks up very well versus competitors. I think the balloon design is perfect for PVI. I think it optimizes a lot of the process. And if you think about where the prior balloon-based systems were used in Europe. I think this fits very nicely there. But its efficacy is great. [ Parasixomal ] data is best-in-class.

As we said during the period we were talking about the development of Volt, we believe in mapping and contact and visualization of contact. And I think that's what we're seeing for these early cases here. We're just providing really real-time feedback on tissue contact. That leads to fewer applications leads to fewer less [indiscernible], likes to lead to less muscle contraction which I think is really important.

If you think about some of the segments globally that are going to start to really advance in terms of market segments, segments that will benefit by having a procedure that could be done without general anesthesia and just with general sedation. And I think Volt fits very nicely into those segments there, too.

So -- so far, so good. The team is doing a great job. They've been doing a great job over the last couple of years. And I think they're excited now to transition to this phase of the strategy now, which is [ not ] now that we've gained a lot of market share with mapping, and that's not bringing the PFA catheter that we think is very competitive.

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

Robert, I just wanted to ask one follow-up question or multipart follow-up question on Libre. First, I'd love to get your reaction to the proposed competitive bidding for CGM and what that could mean for you. Second, the RFK junior comments on wearables, do you think that could accelerate type 2 non-insulin CMS coverage? And just lastly, on the dual [ keytone ] sensor, do you think that could drive share gains for you in intensive insulin patients where your share is lower?

Sure. So 3 parter. So on competitive bidding, Larry, listen, there was nothing unexpected in the CMS proposal document here. I don't think there's any major changes as it relates to CGM. If CMS chooses to do competitive -- go down the competitive bidding route. It's really going to be the DMEs that are going to be the ones doing the bidding, not the CGM manufacturers. I think this is probably going to take a couple of years to fully implement the process.

And I don't expect there to be an impact on Abbott, but we're going to continue to monitor. And as I've said in other situations, pme of the things that we've got to keep on doing here is to be the leader of scale, leader of cost and so we'll continue to monitor, and we'll be ready.

Your other question was regarding the comments from the Secretary of HHS regarding wearables. Listen, wearables are powerful. We've known this since we've launched Libre. They're very powerful behavior modification tools. And behavior modification has really proven to really drive significant impact on one's health. And so I think if you can keep your glucose levels in a healthy range. It offers a lot of benefits. There's lower risk of diabetes, heart disease, it helps with weight loss. We've seen that, improves productivity, et cetera.

So I appreciate the secretary's efforts here to promote improving the health and wellness of all Americans. And I think that's in line with our company's mission and certainly supportive of this initiative we would hope that it would be Americans wearing CGM that were made in the United States. We have 2 manufacturing sites. But anyway, we support that initiative.

And then I think your question was regarding the continuous glucose keytone sensor. Do we think that, that can accelerate our share gain? 100%, yes.

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

I had one product related and one P&L question. On the product side, our CRM is doing really, really well. How I guess, are there any metrics you could share on that? What percentage of your installed base has been updated or convert to a -- where are we in the conversion cycle and is this now like a double-digit or teens for the foreseeable future? What do you think is the ultimate TAM for this kind of product is?

I think it's fundamentally changed the growth trajectory of our CRM business. And now you're trying to ask yourself, okay, is this a one-off thing? Or can we bank on this?

If you look at the trajectory of our CRM business, 2023, when we launched single chamber, our growth rate was 7%. 2024 was 7% and first half this year, it's 8%, showing 10% growth this quarter. I think that achieving this is very sustainable. I talked about what we wanted to do with here with AVEIR in the past. So you've got a $4 billion global pacing market that really hasn't seen much innovation, Vijay.

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

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

We've seen an increase in the amount of physicians that have been trained that that's increased, like by 50%, I think it was the last time I saw it. The implants per day have doubled as a result of that. So I think it's going very well. And I think I expect to see this outer performance continue here in the next kind of several years.

One of the things that we're also doing to kind of be able to support that, and I said that in my prepared comments, was we got to continue to innovate here if we want to be able to kind of support that growth, right? So we'll launch a next-generation over that's got a 25% longer battery life. That's going to add another 2 years, and we're developing this conduction system pacing product here, which we're targeting to start up pivotal call in 2026. And I think given the excitement that we have with the product, I think it's -- I think we're going to see kind of good enrollment there, too.

So -- and then on top of that, we're rolling it out internationally too, right? So right now, it's -- it's launched in 50 countries. Some of them have been launched for a year or 2 years. Some of them were just in the process of launching. So I think there's a lot of good momentum here with this portfolio, not just in terms of execution out in the market, but also in terms of R&D and clinical work.

That's helpful. And maybe one P&L on the EPS guidance here. The top end was lowered by $0.05 and [ midpoint ] was maintained despite, I think, operating margins tweak down, organic coming down, where are the offsets here? Maybe some comments on what is underlying operational versus perhaps change in FX and tariff assumptions?

I'll let Phil take that one.

Yes. Thanks, Vijay. Very quickly here, Robert touched on some of the sales drivers and kind of derisking elements there. And we also touched on kind of the FX impact going forward at current rates, at least and kind of that relationship that's not a one-for-one fall through just kind of the mechanics of how inventory moves through the system and the like.

So while there's a neutral top line impact, there's still a headwind both year-over-year, as Robert touched on in his opening comments, but still a headwind on the bottom line here, along with kind of tariffs kind of rolling in second half of the year as those work their way through inventory as well. So those are the elements of derisk and kind of normal headwinds.

Sorry, could you quantify which -- what was tariff contribution versus operational?

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

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

First question was on M&A. Just kind of curious how you're seeing the pipeline shape up in diagnostics and medtech. And if you could see Abbott a more sizable transaction this year on the M&A side. And then it sounds like on EPS, like you're comfortable with the Street consensus double-digit EPS growth next year, is that assuming tariffs in rates? Or do you have a lot of P&L flexibility next year as well as tariff rates move a bit from here?

Sure. What was the first question again? Oh, M&A. Yes. Yes, it's a good environment for M&A, good opportunities out there, got a strong organic pipeline. So that allows us to be a lot more selective here. We're seeking the opportunities that will fit us strategically and going to generate an attractive return. So not looking just to acquire a business to make our top line larger here. The profitability, as I've said, the earnings, the ROIC that all matters to us.

And then your question on EPS for next year, does it include -- well, listen, it includes what we know right now, Travis. And those -- as we're all going through, they can change they can kind of move around. But as I said in the call in April, our goal here is not to use focus on mitigating items that would cause a year-over-year kind of impact.

So we didn't go out and build a bunch of inventory over the last couple of months. We did do some of that where we thought it was important to do. But using that as the way to mitigate tariffs this year is not is going to cause, I think, headwinds if you just rely exclusively on that.

So as we've said, we're building -- we have a whole team that's been working on this. There are like 6 different work streams that we're looking at. And we've got a very strong manufacturing network around the world, around 90 manufacturing sites. We're going to build another cardiovascular manufacturing site here in the U.S. and began that process also.

So we're thinking about it once tariffs get set in place -- they're very difficult to walk away from. So we have to think also medium term but also long term.

Our next question will come from Danielle Antalffy from UBS.

Robert, I actually just have -- I'll keep it to one product question and that's within med tech, specifically structural heart. I mean you guys have been launching Amulet for a while now, and we have a pretty potentially big game-changing trial readout coming for your competitor early next year, which, to me, feels like a rising types will sell both situation potentially.

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

Sure. Well, I mean -- so yes, with all the things you've been talking about there is this is a very important kind of growth opportunity that we see also. A competitor is -- has been investing in a trial that could potentially expand the market. So are we. So we have our own trial here. I think it's going to be important to have the data to be able to kind of support your product. So we've made that investment. We should complete enrollment in our trial this year.

And then like I said, if these are all great trials and positive trials, I think it's going to have a big impact here in terms of our ability to expand the market. Our job also we're not the market leader. So we have things that we also have to address. So we've spent a good amount of R&D money, Danielle, to make sure that we can accelerate here our second-generation device, and we're enrolling in that pivotal trial.

I'd say what we were trying to resolve there was or improve upon is we've got great -- we've got a superior [ sealing ] capability, and we've got this much broader range of ability to hit a lot of different types of anatomies. But one of the feedbacks that we got is like can you make it easier for deployment and delivery. So teams have done a really good job with that.

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

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

I wanted to just ask about your TAVR franchise. And maybe, Robert, if you could help or share your expectations for market growth here. The commercial effort for Navitor and then the addition of this pipeline, [ balloon-expandable ] and [ Cantor ] platform. I mean how does Abbott view the market? And how do you see the franchise taking share and what will drive that? And just a quick nuance. If you can you talk about anything that you're seeing in Europe with the Boston exit and Navitor uptake or share gains from that competitor event would be great.

Sure. Well, listen, we wanted to be -- our vision here is to be the leading structural heart company, global structural heart company. And the only way you can actually do that is to really have a full portfolio of products here. And obviously, I talked a little bit in my comments about mitral. We've made the investments in the tricuspid area and making the investments in the TAVR side, too.

So specifically on TAVR, Navitor continues to get a lot of positive feedback from the physician to very -- it's a very compelling offering. It's an excellent [ volt ] design, easy to implant, got great clinical data. Our sales have doubled over the past 2 years. The big driver of that, I would say, over these past 2 years has been international has really been the driving factor here of success, and I expect that to continue. There's an opportunity here to accelerate that growth internationally with a competitor market exit. I know the team is all over that.

And with the upcoming CE mark that we have planned for Navitor to have low and intermediate risk label expansion. It couldn't come at a perfect time to be quite honest with you. So I expect that to continue and accelerate for us, Josh. And then we're building our position here in the United States. Right now, we're in about 20% of the centers in the United States. And the way to expand our position here is we got to be in more centers. And the way to do that is you need more clinical people, you need more feet on the street. And that's what we're doing.

So we've actually -- we will be doubling the size of our team -- and I'd say, putting ourselves in the realm of being more competitive in terms of access to sites. By the end of this year, we'll have doubled it versus last year. And there's a normal ramp-up in terms of rep productivity that we know in this space.

So all the people that we've been adding, I expect that to now start to really have a nice impact as we go into 2026. It's definitely a competitive space. There's no doubt. But I think here between the commercial investments we've made in the United States. The opportunity we have with label expansion and just a market disruption in international markets, I think that is a tailwind for us to there.

And then once you commit yourself to developing next-generation kind of balloon expandable TAVR, that also opens up a nice opportunity for us, even though that will probably be more towards the end of this decade in terms of full launch, but it does help as you're rolling out all these strategies that I've talked about. So we feel good about the TAVR team is doing a good job like them to do better. But so far, so good, and there's a lot of good momentum for us on this business.

Our next question will come from Adam Maeder from Piper Sandler.

Two quick ones for me. I'll ask them both upfront. Robert, first I was hoping for an update on [ in formula ] litigation and the MDL process? And how you think about potential pathway to resolution from here?

And for the second question, I wanted just to go a little bit deeper on the dual analyte sensor, specifically around expected approval and launch timing? Is that first half '26 pricing strategy and how quickly you'll integrate with the different pumps?

Yes, sure. Listen, I'm not going to comment specifically on any kind of upcoming case regarding the net litigation. I'm going to commit to what I've always said, which is this is a product that has been supported by the medical community by the regulatory community, by the scientific community. It's been in the market for -- it's been in the market for a long time. It does not represent much to our revenues. And we stand behind the product, it's safety.

The regulators have stood behind it and kind of issued statements about the product. And we're going to stand behind it. If we need to take action on the product, and that, like I've said in the past, it's a small part of our revenue. And if we have to take action on the availability of that product, we will.

If the science is not respected, if the regulatory process is not respected, if the medical community is not respected, the it's going to be difficult to keep that product on the market. But so far, I think there's been a lot of support from the physicians and from the regulators, a lot of support from a variety of different stakeholders to want to see this result and this product remain on the market. And ultimately, those making the decisions and how to feed the most vulnerable of the American citizens here should be physicians and neonatologists and not lawyers and corp rooms. So -- and then -- sorry, what was your second question?

Sure. The second question was just a couple of follow-ups on the dual analyte sensor. I wanted to just better understand expected launch timing in the United States if you're giving any color around pricing strategy and just how quickly you'll integrate with the different pump players?

Okay. So 3 questions there. On timing, I'm not going to talk about timing of that. I'm not going to talk about when we've submitted, how we've submitted. All I'll say is that this is a first time that you'll have a sensor that will measure continuously 2 different analytes. So we've done a lot of clinical work approximately 5 different trials to be able to support its submission. We've already completed those trials.

So -- so I'm not going to give time lines as to when the product is out. Neither am I going to give any details on pricing and how we will think about pricing. But as it relates to integration, one of the reasons we wanted to line up have the conversations with the different insulin delivery pump companies is to make sure that when we do have it approved, that it will be available as quick as possible for that -- for the population. So as you saw during the ADA, there were some announcements over there. And I think that's -- that's a little bit of the strategy behind that.

Our next question will come from Matt Miksic from Barclays

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

Yes. I get that people always like to triangulate. I'm not going to tell you. I'm not going to telegraph where we're going. But I mean, I've been pretty clear. It's diagnostics. It is devices. Those are the areas that are of interest to us.

Like I said, there's a lot of opportunity in both those areas. And we'll just continue to apply the framework that we've always applied to when we do M&A, which is a belief that can we make these -- can we make these assets better, can we bring them to more people -- can we bring care to more people as a result of them.

So I don't think I've got more to add on that, Matt. On top of that, as I said, we've got great growth rates here right now across the businesses. And so again, that puts us in a space where we can be a little bit more selective.

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

And our last question will come from Marie Thibault from BTIG. Wanted to follow up here. You've mentioned that we'll see biosimilars on the market [indiscernible]. I wanted to get a little more detail on how to think about kind of the reach of those products, the investments needed on your end maybe in SG&A and things and the size of some of those markets that you're trying to reach.

Sure. This is an opportunity for us to really look at how do you sustain that growth rate in this business. This is a business that has been growing between 8%, 10% on it's learned through a very strong management team how to manage through kind of FX cycles and inflation in markets. So they've been able to expand margins.

So this is about how do we do this in a capital-efficient way to bring more assets to an existing infrastructure that's pretty well set up, Marie, between the sales force that calls on the doctors, that calls on retail distribution the teams that we have in place that work with government agencies and regulators. So the infrastructure in place is there.

Do I think that there's -- there will be some need to add some SG&A to be able to educate the market because this is a very underpenetrated market when it comes to biologics. So there is some SG&A involved in that, but it's not like this -- you're really taking advantage of the infrastructure and the scale that you have in these markets across different channels and regulators to be able to add in this.

So I think we'll leverage our existing presence in these emerging markets. We're going to bring these cutting-edge medicines into these countries that I say that historically lacked the access. The predominance of the diseases are just as large from a percent perspective than they are in the developed markets.

And if you look at the portfolio, it will look -- we've looked at where the areas that we think will be of interest. So autoimmune disease, women's health oncology, access to GLP-1s. So the team has really done a good job laying in here a real nice pipeline of products. And as I said, we're going to start launching in a small market this year, and then we'll start rolling them out, obviously, as they become from a regulatory perspective available to us, we'll be rolling them out next year. And I think this can be a nice contributor here to our growth in this business in the next few years.

Okay. Well, listen, I -- just a few comments here to close. I'm pleased with what we've accomplished in the first half. We've delivered high single-digit sales growth and double-digit EPS. We've expanded our gross margin and operating margin, which is something that we've committed to when we talked about, and we've done it by about 100 basis points.

The second half sales growth guidance is derisked to account for some of these items here that I consider to be a little bit more transitory that are specific in the diagnostic space, and we're going to be lapping these next year. That still leaves $1-plus billion revenue -- quarterly revenue growing high single digits throughout the rest of the year. And on top of that, we've reaffirmed our guidance despite some of these headwinds and the impact of tariffs.

So I think this is another great example of how our diversified model continues to provide that strong foundation, it's resilient and it's well positioned to deliver top-tier results. So we've got good underlying momentum here that I'm very confident will carry into next year. So with that, I'm going to wrap up. Thank you for joining us.

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 Abbott's Investor Relations website at abbottinvestor.com. Thank you all 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.