Abbott Laboratories (NYSE:ABT) Q2 2023 Earnings Call Transcript

Page 6 of 10

Their charts, there is data, there is all that you have in the app, but we believe that the simplicity of this Lingo count is really key to modifying behavior. It’s a subscription based – it’s a subscription-based model. It’s direct to consumer. We are looking at opportunities for partnership, but it’s a direct-to-consumer the website, the web shop is open. And the pricing is pretty much in line with our cash pay price for Libre. And I think the key aspect here is for this app is that we have to constantly provide content to the app, constantly new information, new data. And if I think about everything that’s going on in the world of AI, and I think about – how I think about AI for Abbott, we have a lot of opportunities. I would put this one here together with Libre as our biggest opportunity to capitalize on AI and what it can do for personalization.

So it’s out in the UK. It’s launched yesterday. We will study. We will learn from the UK and then we will roll it out to other markets. I’ll preempt your question, which is always like is it going to come to the U.S.? Yes, it will. We intend to file in the U.S. at the end of the year. I don’t expect big contribution right now from a financial perspective early on. Maybe my team will surprise me, but I absolutely expect this to be a significant contributor over time for us. And so that third part of the growth stool here for that platform is out of the gates, and we’re excited to see what we can do.

Bob Funck: Okay. So Vijay, on the gross margin question. So back in January, we guided a gross margin profile of 56% of sales for the full year. And through the first half of the year, the base business, so excluding COVID testing, is right in line with that. We are, however, seeing lower gross margin on our COVID test do really due to the significant decline in volumes that we’ve seen compared to our assumptions at the beginning of the year. And so that’s really what’s being reflected in a little bit lower gross margin that you’ve seen. And I think for the balance of the year, we would expect to see gross margins roughly in the range of 56%, and then we would look for steady improvement after that. As Robert talked about, it’s a key focus area for us.

Each of our businesses have gross margin improvement programs in place with teams that are dedicated to that effort. And as – so as we work into 2024, we would expect to see some improvement overall in our gross margins.

Vijay Kumar: Understood. Thanks guys.

Operator: Thank you. Our next question will come from Joanne Wuensch from Citi. Your line is open.

Joanne Wuensch: Good morning and thank you for taking the questions. Briefly, can you sort of tear apart the electrophysiology growth rate of 17%. How much of that is in the U.S.? How much of that is OUS? And what do you think is driving that? And then I will just jump in with my second question, which is if you have reclaimed about 75% of the pediatric nutritional business, can you get to 100%, or do you think you are more or less where you can get to? Thank you.

Robert Ford: Sure. So, really good growth on EP, we are up about 17%. Total U.S. was high-single digits, around 9%. International was about 24%. In that 24%, Joanne, there is probably about 8 points or 9 points of kind of China recovery, so if you look at the growth rate internationally outside of China that was about 15%, so real strong growth. Again, if you look at Europe specifically, it was up just under 20%. So, it’s pretty broad-based. And even if you look at the big five countries in Europe did really well there. TactiFlex in those countries that’s been out there for a couple of quarters right now, we only got approval in the U.S. towards the end of the quarter. So, that’s doing really well, and it’s really helping.

Page 6 of 10