Abbott Laboratories Q4 2024 Earnings Call Transcript

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Provided by AlphaStreet
January 22, 2025
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Operator

Good morning, and thank you for standing-by. Welcome to Abbott's 4th-Quarter 2024 Earnings Conference Call. All participants will be able to listen-only until the question-and-answer portion of this call. During the question-and-answer session, you will be able to ask your question by pressing the star 1-1 keys on your touchstone phone. 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 Camilla, Vice-President, Investor Relations.

Michael Comilla
Vice President of Investor Relations at Abbott Laboratories

Thank you, 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. 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, 31 December 2023. 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 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 the company 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.

Robert B. Ford
Chairman and Chief Executive Officer at Abbott Laboratories

Thanks, Mike. Good morning, everyone, and thank you for joining us. First, I want to express gratitude to my Abbott colleagues around the world whose hard work and passion are the driving forces of Abbott's continued success. Abbott's commitment to innovation, operational excellence and serving the needs of our customers resulted in another year of exceptional performance, which included achieving sales growth of 9.5% excluding COVID testing, delivering 70 basis-points of gross margin profile improvement, driving acceleration in the growth of our earnings per share throughout the year and developing and advancing new products through our rich pipeline.

The strong performance resulted in generating $8.5 billion of operating cash-flow, which was used to reinvest in the business, fund capacity expansions, repay debt and return $5 billion to shareholders in the form of dividends and share repurchases. These accomplishments played a key role in continuing our well-established track-record for delivering on our financial commitments, which included achieving results that finished at the high-end of our initial guidance ranges we provided for 2024. These results included exiting the year with a very strong momentum as 4th-quarter sales grew 10% excluding COVID testing sales and adjusted earnings per share increased 13% versus the prior year.

For 2025, we're well-positioned to deliver another year of strong growth. As we announced this morning, we forecast organic sales growth to be in the range of 7.5% to 8.5% and adjusted earnings per share to be in the range of $5.05 to $5.25, which reflects double-digit growth at the midpoint.

I'll now summarize our 4th-quarter results in more detail before turning the call over to Phil. I'll start with Nutrition. Our sales increased 7% in the quarter. Growth in the quarter was driven by double-digit growth in adult nutrition, led by our market-leading Ensure and Glucerna brands. We achieved a significant -- significant milestone last year with annual sales of Ensure surpassing $3 billion. This achievement helped deliver another year of strong performance in Adult nutrition with annual sales of Adult nutrition products growing 9% last year. This strong performance is a continuation of a well-established trend. The five-year compound annual growth rate in Adult Nutrition is 9%, which reflects the impact of our well-known and respected brands, favorable demographic trends and the significant investments we've made to expand manufacturing capacity to serve the growing global demand for our products.

Moving to diagnostics, where sales increased 6% excluded COVID testing sales. Growth in the quarter was led by rapid diagnostics, where excluded COVID testing sales increased 16% in the quarter. This was driven by strong demand for our portfolio of respiratory disease tests used to help diagnose influenza, strep throat and RSV. In core laboratory diagnostics, growth of 4% was driven by continued strong demand for our market-leading immunoassay clinical chemistry, hematology and blood screening testing panels. Excluding the impact of challenging market dynamics in China, the combined growth in all other markets was double-digits in the quarter.

Turning to EPD, where sales increased 8.5% in the quarter. Growth was well-balanced across markets and therapeutic areas that we participate in, including gastroenterology, women's health, CNS and pain management. EPD also delivered broad-based growth across the markets we serve, including double-digit growth in several countries across Latin-America, Southeast Asia and the Middle-East. By focusing on the therapies most needed in these faster-growing markets, we continue to sustain our long track-record of delivering strong growth, which includes a five-year compound annual growth rate for EPD of 8%.

And I'll wrap-up with Medical Devices, where sales grew 14%. In diabetes care, sales of continuous glucose monitors were $1.8 billion in the quarter and grew 23%. For the full-year 2024, sales of continuous glucose monitors were approximately $6.5 billion and grew 22%. This included growth of 27% in the US where our market-share on a revenue basis has increased by more than 10 share points over the last three years.

In electrophysiology, growth of 9% was well-balanced across the US and international markets. As expected, growth in the quarter was impacted by a challenging comparison versus the prior year, where we saw a sharp increase in-demand for our cardiac mapping systems as customers prepared for the launch of PFA catheters. Excluding the impact of this prior year comparison dynamic, growth would have been double-digits globally in the US and internationally.

In Structural Heart, growth of 23% was driven by strong performance across our market-leading portfolio of surgical valves, structural interventions and transcatheter repair and replacement products. Structural Heart represents one of the most attractive areas in the field of medical technologies. It is an area that we have invested in heavily and we're seeing those investments yield outstanding results. Our comprehensive portfolio of products drove an acceleration in sales growth in Structural Heart throughout the year.

In rhython Management, growth of 7% was led by Avere, our innovative leadless pacemaker and Assert, our newest implantable cardiac monitor, which we launched in the US last year. With growth of 7% for the full-year, our rhythm management business delivered another year of performance that far exceeded the market and we expect that to continue this year. Last month, we announced that we completed the first-in human implants of a new version of specifically designed to deliver pacing to the left bundle branch area of the heart, activating the heart's natural conduction system. This highly innovative device currently in development was granted breakthrough designation by the FDA.

In heart failure, growth of 9.5% was driven by our market-leading portfolio of heart assist devices, which offer treatment for chronic and temporary conditions. In Vascular, growth of 7% was led by double-digit growth in vessel closure products and growth from are below-the-knee resorbable stent. And lastly, in neuromodulation, sales grew 8%, driven by strong demand in international markets for our Eterna rechargeable spinal cord stimulation device.

So in summary, we delivered another quarter of strong growth with sales growing 10% and earnings per share growing 13%. For the year, we achieved the upper-end of the initial guidance ranges we provided for 2024. We made great progress expanding our gross margin profile and we expect that progress to continue into 2025. The pipeline continues to provide a steady cadence of new growth opportunities and we're well-positioned to deliver another year of strong growth in 2025.

I'll now turn-over the call to Phil.

Phil Boudreau
Executive Vice President, Finance and Chief Financial Officer at Abbott Laboratories

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 4th-quarter results, sales increased 8.8% on an organic basis and increased 10.1% when excluding COVID testing sales. Foreign-exchange had an unfavorable year-over-year impact of 1.4% on 4th-quarter sales. During the quarter, we saw the US dollar strengthen against most currencies, which resulted in unfavorable impact on-sales compared to exchange rates at the time of our earnings call-in October. Regarding other aspects of the P&L, the adjusted gross margin ratio was 56.9% of sales. Adjusted R&D was 6.3% of sales and adjusted SG&A was 26.3% of sales in the 4th-quarter. Lastly, our 4th-quarter adjusted tax-rate was 15%.

Turning to our outlook for 2025. Today, we issued guidance for full-year adjusted earnings per share of $5.05 to $5.25, which reflects double-digit growth at the midpoint of the range and contemplates an adjusted earnings per share forecast of $1.05 to $1.09 for the first-quarter. For the year, we forecast organic sales growth to be in the range of 7.5% to 8.5%. Please note that we are no longer providing separate guidance for the sales growth excluding COVID testing sales as COVID testing sales represents less than 2% of total company sales in 2024. Based on current rates, we would expect exchange to have an unfavorable impact of around 2.5% on full-year reported sales, which includes an expected unfavorable impact of approximately 3.5% on our first-quarter reported sales.

We expect our full-year 2025 adjusted gross margin profile to be around 57% of sales, which reflects an improvement of around 80 basis-points versus the prior year. We forecast our full-year 2025 adjusted operating margin profile to be in the range of 23.5% to 24% of sales, which reflects an improvement of 150 basis-points versus the prior year at the midpoint of the range. This improvement is driven by a combination of strong gross margin expansion and operating margin leverage. We forecast our adjusted tax-rate to be in the range of 16% to 17%, which reflects an increase compared to last year related to the adoption of the Pillar 2 tax framework.

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

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Operator

Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, please press star 11 again. For optimal sound quality, we kindly ask that you please use your handset instead of your speakerphone when asking your question. And again, that's star 11 to ask a question. Please standby. We compile the Q&A roster. And our first question will come from Robbie Marcus from JPMorgan. Your line is open.

Robert Marcus
Analyst at J.P. Morgan

Oh, great. Thanks for taking the question. Congrats on a nice quarter and guide. And maybe, Robert, I could start with the 2025 guide. Once again guiding to-high single-digit organic sales growth, healthy operating margin expansion and nice to see 10% EPS growth back-in the algorithm again. Maybe you could just speak to some of the key growth drivers and how we should think about the different business segments on the top-line and some of the components of the operating margin expansion down the P&L.

Robert B. Ford
Chairman and Chief Executive Officer at Abbott Laboratories

Thanks a lot. Sure, Robbie. Yeah, it's nice to see kind of the headline print now back to double-digit EPS growth. I think that's probably one of the things that you don't -- it's one of the things you'll see now, Ravi, as we go into 2025, I mean, you've got a lot of growth drivers there. But I think one of the big things is that you don't have the COVID sales those decline cloud that's kind of overshadowing all these real strong growth drivers that we got in the business. And you saw that in Q3 as we as we showed 13% EPS growth -- sorry, in Q4 as we showed 13% EPS growth. So I think that's one big aspect is just not having those sales decline. I mean, we've got COVID sales in 2025, but it's -- as Phil said in his comments, a significantly less from our total revenue perspective.

I think it starts with -- I think it starts with the top-line always, Robbie. And the markets that we compete in, they remain attractive. We're seeing acceleration in several of them. I mean, we're very diversified healthcare company. So we get to benefit from all the different dynamics that are going on in healthcare, whether it's increased health and wellness focus from consumers, we get to benefit from that on our nutrition business. Every treatment requires a diagnostic test, about 70% of them require a diagnostic test. So we're seeing continued growth over there. And then we've got two areas where we focus on treatments, whether it's pharmaceuticals or medtech. And so all of those markets, they're accelerating. And then within them, we've got strong product portfolios that are either keeping up with these very high-growth markets or we're outperforming the markets and taking shares.

And if you look at the contributions, we've got your current drivers, whether it's Libre, TriClip,, Navitor, Amulet, all of those products in the cardiovascular space. So the bases are loaded, I would call that. And then you've got nice arm deck circle and a lineup of batteries that are coming up right after that, whether it's biosimilars, Volt, innovations in the Libre portfolio, some clinical trial readout. So I think we feel very good about all of the businesses and you saw all of the businesses improve their growth from Q3 to Q4. So I think it starts with the top-line and I think we're well-positioned in them.

To your question on the margin drivers, I'd say we've got -- we've done a lot of work on gross margin expansion. We've talked about that committing to a 70 basis-point improvement in 2024. We achieved that. We believe that we can achieve another 80 -- another 80 basis-points of improvement in 2025 and that's what's embedded in that guide is continuous improvement on the gross margin in the tune of 80 basis-points, really driven by continued focus on gross margin improvement programs and then mix as some of the higher gross margin products continue to grow ahead of the company average, you get that mix effect.

And then down the P&L, I think you've got an opportunity, as we've talked about in the past to be able to leverage the business and obtain spending leverage on across the business. And again, I think that was another -- another challenge we had during COVID or as the COVID was coming down, we really only relied on one lever of margin expansion, which was gross margin improvement. I'd say now you've got two, we actually have two, which is our original formula of gross margin expansion and then -- and then spending leverage. So you put all that together, you've got about 16% actually underlying growth in the EPS coming from the top-line, the gross margin improvement and the spending leverage. And then we've got obviously some friction on FX. I think every company is going to face that as we've seen the strengthening dollar and increased tax rates, which also aren't surprise. We've known about that. And so that brings us down to that -- down to that 10%.

So I kind of look at this and say, okay, what you see now for 2025 is the Abbott that we know, the Abbott identity that we built, which is high single-digit top-line, double-digit bottom-line, gross margin improvement, spending, leverage and productivity, strong operating cash-flow. We know-how to deal with FX. So we deal with it every year and we're dealing with it again this year and still being able to deliver double-digit EPS, dealing with a higher tax rates. I think I saw some notes about calendarization about maybe Q1 not coming in. I can tell you we looked at our Q1 and all of our gating -- all of our gating or EPS is very much aligned to what it was in 2024. It's very much aligned to what it was pre-COVID.

So again, all the elements of Abbott and the Avid identity that we know are there and we're looking-forward to 2025.

Robert Marcus
Analyst at J.P. Morgan

Great. Thank you very much.

Operator

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

Larry Biegelsen
Analyst at Wells Fargo & Company

Good morning. Thanks for taking the question. So Robert, I guess that you talked about it starts with the top-line. You had another really strong year for CGM with over 20% constant-currency growth on $6.5 billion in sales. So love to hear you talk about your expectations for growth in 2025, the status of the Libre 3 supply issues, any color you have on the Lingo launch?

Robert B. Ford
Chairman and Chief Executive Officer at Abbott Laboratories

Thank you. Sure. So let me talk about Libre 3 supply. As we spoke about during the last call, Larry, there was a little bit of a mismatch between our manufacturing coming up online and the demand that we were seeing, especially here in the US that caused a little bit of friction there. But as I said, we were in-process of getting our new manufacturing site up and running. I was there in November and seeing the team and that's going now at full force. So Libre 3 supply with two manufacturing sites up and running and I think you'll start to see throughout the next one or two quarters a change here and a little bit on the MBRXs on the TRxs.

I know you guys like to look at those quite often, I guess. Those are an important metric to look at, Larry, but they're not the only metric to see how the businesses are doing. I mean, I think you saw that in our Q4, we're able to grow the US at 24% and so there are other elements that aren't measured. I think you also -- you guys also saw the impact of relying exclusively on those datas in Q3 as competitors had challenges also. So it's an important metric to look at, but I would say it's not the only ones and I think we've kind of shown that here. So Libre 3 is doing pretty well and it's just going to get better.

As I look at 2025, I'd say there's some pretty interesting kind of growth drivers here for us. I'd say, first, as a base-case, I still think there is underpenetration in the intensive insulin using segment. I mean, if you look at the US, there's still 25% of that segment that are not on CGMs. And if you think about that internationally, it's more like 50%. So I still think as a base-case to driving all this growth, there's all this opportunity in this segment.

But I think there are three areas in 2025 that I believe accelerates that opportunity for us. One of them is obviously basal coverage. And we continue to see with the publication of more clinical evidence, you see more-and-more markets move towards expanding reimbursement of basal coverage, reimbursement coverage. We have a couple of markets where we're the only ones that do have that coverage, whether it's Japan or Canada, these are large markets. So these are great opportunities for us where we've got this head-start and we'll keep on driving that. So I think basal is a big bucket of growth.

I think the other area that I've talked about as being an area of growth for us is more kind of share ability to take share and that's through our connectivity strategies with insulin delivery systems. We've been talking about all the things that we've been doing regards to partnership with insulin pump companies. And I think you'll see throughout this year several announcements on connectivities in different geographies and that gives us the opportunity to penetrate, albeit a smaller segment, but be able to penetrate that segment and take share.

And I think the third area of growth for us of acceleration is just the whole OTC non-diabetes application with the launch of lingo. We continue to see very nice trends. We've launched it in a restrictive number of US cities. But I think now that we understand what it takes to be able to drive adoption with this completely different consumer segment that we'll probably be expanding this and expanding this more nationally here in the US and potentially looking at other areas internationally due to bring this.

So I think the Lingo launch is going very well in several areas. I think it surpassed some of my expectations, especially regarding reorder rates and -- and I think those continue and I think that's going to be another kind of leg of the stool, so as to say on this growth. So I think those are -- those are really the kind of growth drivers that we've got planned for Libre. I think the insulin intensive insulin segment is still an opportunity, a pretty significant opportunity. And then you've got these three accelerators on-top of that.

Larry Biegelsen
Analyst at Wells Fargo & Company

Thank you very much.

Operator

Thank you. Our next question comes from Travis Steed from BofA Securities. Your line is open.

Travis Steed
Analyst at Bank of America Securities

Hey, thanks for taking the question. I wanted to ask about EP growth. Still strong high-single-digits in the quarter and I think it was even faster than that excluding the tough mapping comp. But wonder, there's a lot of things moving around in that market right now. One competitor had a big setback in PFA and your progress is moving forward with. So just thinking about how you're thinking about ET growth in '25 as you bridge the PFA in '26 and your ability to kind of regain market-share once both launches.

Robert B. Ford
Chairman and Chief Executive Officer at Abbott Laboratories

Sure. Yeah. I mean I think this wasn't a -- this wasn't a surprise for us. I mean, and it wasn't really driven by any kind of adoption of PFA regarding our Q4 growth rate. In fact, as I've said in previous calls, I think the net effect for us, the net-net effect for us has actually been very positive. What we did have was an execution of that strategy, Travis, where we said, okay, we're going to bridge ourselves and one of the ways to do that is through -- is through our mapping. And that's what really drove success in 2024 is what we did in Q4 of 2023, really taking advantage of our ability to offer the only real open, truly open mapping system. So that created that comp issue. It was double-digits in Q4, 12% in the US, 12% internationally. So still seeing very good.

And I think, again, I would say, these results, I think we outperformed a lot of the expectations that many of you guys had about -- about our EP business and I think the driver of that has been the team. The team in the field has just been spectacular, I think and I've been close to them last year and I think what they did was really strong. So I guess I answer your question in 2025 really looking at what we did in 2024. And I expect -- I expect to continue to benefit in 2025 from the -- just the general increasing procedure trends.

We've got opportunities to grow with some recently launched products, whether it's our Grid X, our next-generation mapping catheter, our new Agilis introducer sheath. I mean, that's a great opportunity for us also. So yeah, it's going to be a little bit more competitive. It's been pretty competitive in 2024. I expect that intensity to increase when it comes to the ablation catheters, but I'm confident that we can maintain a strong position in the -- in the mapping segment and everything that comes with all the consumables that come with that.

On-top of that, our pipeline is very strong. We'll continue to engage KOLs and our customers. And we've got an ongoing trial right now with a dual energy source catheter in internationally and in the US. We've got integration with ICE. We've got kind of new sheets to launch. So I think the pipeline allows us to continue that interaction with the KOLs and with the users. So we should expect -- I think you mentioned bridging to PFA in 2026. It's more like 2025 on PFA, at least internationally. So I feel-good about it.

And maybe you've got a tale of two halves where the second-half is going to grow faster than the first-half as Vault comes on-board. But I'd say for the full-year, high-single-digits seems like a good place to start, call that our base-case. And then to the point that you made about competition and some of the dynamics that have occurred the last couple of weeks, it's still a little bit too early to tell, but that could be an opportunity for us also. So I feel-good about the business, not only the pipeline, but more importantly, the team that we've got, they're doing an incredible real strong job.

Travis Steed
Analyst at Bank of America Securities

Great. Thanks a lot.

Operator

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

Vijay Kumar
Analyst at Evercore ISI

Hi, Robert. Thanks for taking my question and congrats on a strong finish to the year. I guess had a two-part question if you don't mind. You know know, really strong operating margins, you know, driven both by gross margins and operating leverage, but your gross margins are still below pre-pandemic levels. I'm curious, when you look at the margins, how sustainable are these trends, perhaps not at triple-digits, but should we be thinking about a biotrend margin framework as gross margins normalize?

And my second part is on-balance sheet. I'm curious, there's been some M&A activity picking-up in MedTech. How are you thinking about devices versus diagnostics? I'm curious any thoughts on cancer screening, MRD, etc?

Robert B. Ford
Chairman and Chief Executive Officer at Abbott Laboratories

Well, I'll let Phil talk to the gross margin, the sustainability of that margin improvement and then I'll take your balance sheet question.

Phil Boudreau
Executive Vice President, Finance and Chief Financial Officer at Abbott Laboratories

Yeah. Thanks, Robert and Vijay here. On the gross margin front, I think we spoke to this the last few calls and nothing here has really changed relative to an underlying focus of the business and of the organization, as Robert touched on here. I think the difference in recent years causing that erosion was the significant inflation in commodity prices, which has really sort of resorted back to, I'd Call-IT normal -- normalized inflationary pressures, pressures that we're very much accustomed to managing through with our organizations and focus on gross margin expansion. And so what you saw in 2024 was exactly that, the recipe we're accustomed to and the commitment in 2025 to do much of the same. So from an expansion standpoint, we expect this to continue and it's not a matter of if, but when we get back to kind of the legacy and historical gross margin profiles.

Robert B. Ford
Chairman and Chief Executive Officer at Abbott Laboratories

Yeah. I guess on your question on-balance sheet, yeah, I've always talked about this, Vijay. I mean I'm -- we do take this kind of balanced approach. I'm not going to give you a formula of how much goes to here, how much goes to there. We do take a balanced approach. And on your M&A question, yeah, there's been -- there's been a an uptake of activity, no doubt. There are some -- there are some good opportunities out there and whether -- and I don't think you're going to see a change in-kind of rate environment, but maybe on the regulatory environment, I think that creates opportunity. I've said that we've got a strong organic pipeline. It allows us to be selective, allows us to look at opportunities that make sense strategically, but also generate an attractive return. I talked about how ROIC is important for us also.

So not just top-line, but return on that capital. So we do take a position here of being stewards for that capital. So I'd say, yeah, we're in a great position. We do have some debt to pay-down this year, which we will. I don't anticipate rates coming down to the point that we might want to look at refinancing that. So we'll pay-off that debt. It's about $1.5 billion this year. But even with that, we're in a great position on to -- with our balance sheet to be able to leverage opportunities that we'll see. Talked about them. There's opportunities in medtech, there's opportunities in diagnostics. And we're in a great position. It allows us to be selective.

Vijay Kumar
Analyst at Evercore ISI

Understood. Thanks, guys.

Operator

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

Josh Jennings
Analyst at TD Cowen

Hi, good morning. Thanks for taking the questions and echo Vijay's congrats on a the strong finish to the year. Another margin question just because the operating margin guidance for '25 was stronger-than-expected. And I think you've talked about a lot of the drivers, Robert and Phil, but just continued positive mix-shift from stronger medical device contributions and the strong top-line growth. But I was hoping you may just help us think through just the margin expansion opportunities in EPD, Nutrition and Diagnostics and just with the outsized expansion in '25, how should we be thinking about sustained operating margin expansion in '26 and beyond? I mean, should we be thinking about 50 to 100 basis-points a year? I appreciate you taking the question.

Robert B. Ford
Chairman and Chief Executive Officer at Abbott Laboratories

Yeah. I mean I'd like to get to that pre-pandemic gross margin. I mean, I know we talk a lot about this being behind where we were from a pre-pandemic, but our op margin profile, especially after our guidance for 2025 is actually ahead of that. So we've been able to achieve that through -- through our spending and spending efficiencies. But I think that's the right range to have. I mean, I think we've always had this notion. I mean, I talked about being able to offset FX and things like that and not provide any surprises. That's part of the -- that's part of the algorithm there, which is we're just constantly having to address gross margin. It's not like this initiative either because of inflation or because of tariffs or anything like that, it's just we're constantly working to improve gross margins.

I'd say on the nutrition side, those gross margins, given what we -- what we encountered over the last two years, those came down. But if you look at them, they have been improving sequentially, almost like every quarter. We got a ways to go to get back to where we were in 2022, on Josh. That's a little -- that's a little bit more dependent on commodities and freight and distribution, things like that. But I think the teams have got a really good strategy here of kind of working on cost-to-serve and even quite frankly, using some pricing where we felt we had to because of some of the increase in those commodities.

So I think the nutrition gross margin is definitely an opportunity that we've got over the next couple of years. And the pharmaceutical teams have done an incredible job at maintaining a gross margin under pretty significant FX. I mean they do a fantastic job at offsetting FX. If you look at the margin profile in that business, it's actually increased several -- several couple of hundred basis-points over the last couple of years. So they've been able to do that also through gross margin.

And I think the other element is just ensuring that we keep on driving the MedTech business that have accretive gross margins, quite frankly across all of those different business units. And if we can continue to do that, then that's how you get to that model of maybe 50 basis-points to 100 basis-points every single year. That's our target. We committed to 70 and we deliver to 70. We're now committing to 80 for 2025 and getting us closer to where we were pre-pandemic. So I feel-good about what we're doing, the strategy we've got in-place, the discipline that we have as a management team to review these programs and dedicate time. They don't just happen. We got to make decisions, there's oversight. So I feel-good about it.

Josh Jennings
Analyst at TD Cowen

Excellent. Thanks again.

Operator

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

David Roman
Analyst at The Goldman Sachs Group

Thank you. Good morning, everybody. I was hoping, Robert, you could go into a little bit more detail on the Structural Heart business. As you kind of break-down the pieces of that portfolio, you have a balance of drivers, some more legacy like MitroClip and some that are more emerging categories like TriClip in the repair segment. But maybe you could help us think about the evolution of that business, which did very nicely through 2024 and how we should think about that into 2025?

And maybe I could just contextualize the broader outlook here and I appreciate your comments about getting back to the of high single-digit top-line and double-digit bottom-line, but it looks like 2025 does carry some headwinds that may prove to be one-time in nature like VBP dynamics in China under the diagnostics side, the transient competition in EP. So maybe you could kind of give us some color on Structural Heart, but also help contextualize the growth rate in 2025 as we think about the long-term as well.

Robert B. Ford
Chairman and Chief Executive Officer at Abbott Laboratories

Sure. I think it's interesting like the sixth question comes on structural heart after we posted a 23% growth. So thank you, David. As I said in my opening comments, I think this is one of the most attractive areas in and it's one that we looked at several years ago and said we're going to build truly a market-leading portfolio of products. And we're not going to just kind of rely on one platform to kind of drive growth. We're really going to assemble a full area here and look across the entire area. And even in surgical, I mean, I think I look at our Epic valve, the feedback I keep getting on the surgical side of it is, it's just doing incredibly well and it's really a preferred go-to on the mitral side for surgical repair, but replacement.

But yeah, I think in the past, David, I think our structural heart portfolio was just viewed as mitrClip. And quite frankly, the sales would say, yeah, that's probably the case. But as we've been building out the portfolio, building out our stroke prevention with PFO approval, with approval and driving growth there, Amulet did very well in Q4 also, grew 25% getting into the aortic segment, right, and really being a player there that has established now clinical credibility, whether it's through clinical trials, but also actual real-world usage of the product. I've been seeing some of Navitor cases here in the US and just the feedback has been very, very positive. So building our aortic portfolio there, we're making big investments, whether it's in our clinical trials to build-out our indications.

We recently talked about shared that we are developing a balloon expandable TAVR valve and we want to have a full aortic portfolio. On the tricuspid side, you know, we were one of the leaders there to say, hey, there's no real good, you know transcatheter opportunity here to treat TR and TriClip has done very well. It's done extremely well, quite frankly, throughout this year. I think the team has done an incredible job getting approved behind the competitor. I would say right now, our data says that the ratio of repair to replace is about two-to-one and we're leveraging all of that built-in kind of infrastructure and scale that we already built with. So what you've seen now is a structural heart portfolio, $2.5 billion grown in -- growing, let's Call-IT mid-teens because it is much more diversified and quite frankly, very competitive products in these high-growth -- in these high-growth areas. So I think that's going to continue. And we're committed to making these investments.

We've got new versions of Amulet to launch. We just got an approval for an updated version of TriClip to ease even more of the implant. You're going to see clinical trials readout in this area for label expansion indications in TAVR and LA. So this is an area that I think what you're seeing now, that kind of growth rate coming from the investments and just great execution from the team. So what was your question was about growth rate --

David Roman
Analyst at The Goldman Sachs Group

Yeah, I was trying to take a second one in there just to contextualize the '25 growth rate given some one-time-ish headwinds like BBP in China and diagnostics and the dynamics in EP being potentially kind of transient as well.

Robert B. Ford
Chairman and Chief Executive Officer at Abbott Laboratories

Yeah. I mean, listen, every quarter, every year, there's always going to be some headwind. What we're trying to do is here is assemble, David, more tailwinds than headwinds, right? But yeah, I mean, you mentioned one, which is a little bit of a headwind for us in our diagnostic business regarding VBP. That's going to be with us in 2025 as they're rolling out new panels of testing that's going to go through that. But outside of that, I'd say the diagnostic business is doing very well, you know. Q4 growth rates in most areas were actually higher than the full-year growth rate in those same areas, US and Latin-America, Europe, even Japan was faster in Q4.

So, yeah, we do have a challenge, but most companies are going to do. And you know what, we've gone through these, Dave. Every company goes through a VBP. And what we're trying to do is, okay, we're not going to define the company by having this one kind of headwind. We've got a lot more tailwinds leverage. We still have to deal with it. We're still managing it. It's still an important part of the business. But the company is more than just than just BBP and in diagnostics and one important market, but just one market. So I think the growth rate is very robust. I mean, 8% at the midpoint on a on a base of $40 plus billion. So I think is pretty strong and pretty good.

David Roman
Analyst at The Goldman Sachs Group

Terrific. Thanks for taking the questions.

Operator

Thank you. And our next question will come from Joanne from Citi. Your line is open.

Joanne Wuensch
Analyst at Smith Barney Citigroup

Good morning, and thank you for taking the question and nice quarter. I'm curious if you could just sort of step-back and talk about the overall health of the market. I feel like I'm constantly answering questions on things such as volume and price. And I'm looking at you delivering mid-teens revenue growth and I think you're seeing something that maybe not everybody is seeing. So I'd love to get your view on that.

Robert B. Ford
Chairman and Chief Executive Officer at Abbott Laboratories

Thank you. Thank you. Sure. I mean, I think it does put us -- I mean the way our portfolio is structured, Joanne, is that it does give us a little bit of a perch, a little bit of bird's eye view into the entire healthcare system in the spectrum, right? And I think if you're getting questions on MedTech and medtech growth, I think all you got to do is continue to look at what companies are reporting. And what they're reporting is ultimately what we're seeing in the market, which is it's not a post-COVID pent-up demand, you are seeing a greater focus from whether consumers and-or the technologies that are being developed that are attracting more people into these procedures.

So I think what we're seeing here is continued -- continued utilization growth, really driven by whether it's demographics combined with the innovation. I mean what the industry is doing in terms of the innovation that we're bringing to the market, it's pretty spectacular. And the procedures are getting faster, they're getting less invasive and that's attracting more people to look at -- to look at these procedures as a real viable first-line option versus guided medical therapy. So I think that's going to continue as long as we continue to see this innovation where we are obviously positioning ourselves pretty strongly in this, and you've seen sequential improvement in the growth rate across quite frankly, a lot of our businesses in MedTech. So I think the utilization is definitely increasing.

Yeah, I think there's maybe some questions, okay, what's going to happen with pricing. We've historically seen some price erosion in the past. I'd say over the last couple of years, it's actually been pretty stable. So I don't know-how that's going to play-out. We've got a scenario here where we believe that with our portfolio, we'll see some pretty stable pricing. But I think utilization combined with stable pricing is what's driving this growth. And we're seeing it in diagnostics too. A lot of our diagnostic business is actual hospital-based diagnostics. So we're seeing those diagnostic tests and those routine diagnostics tests continue to increase high single double-digit, low double-digit growth rates in terms of utilization. So I think that MedTech is benefiting from just this increased utilization and focus of consumers wanting to take care of themselves and looking at these technologies as a viable option for treatment.

Joanne Wuensch
Analyst at Smith Barney Citigroup

Thank you so much.

Operator

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

Danielle Antalffy
Analyst at UBS Group

Hey, good morning, guys. Thanks so much for -- excuse me, taking the question and congrats on a really good quarter, strong end to the year. And Robert, we've talked in the past. I mean, obviously, we talk a lot about medtech in the high-growth areas, but some areas where you've excelled or the legacy sort of slower-growth businesses, I'm obviously thinking CRM being one of those mid to-high single-digits growth. Can you talk about the spread that you applied in CRM and other legacy businesses, I'm thinking like heart failure, peripheral and maybe how you're thinking about elevating those growth profiles in '25, but then also longer-term?

Robert B. Ford
Chairman and Chief Executive Officer at Abbott Laboratories

Thanks so much for taking the question. Yeah. So one of our strategies that we looked at a couple of years ago, Danielle, was if you looked at our MedTech business, it was growing like 8%, 9%. And that was a combination of probably like high-growth areas like EP, structural heart, diabetes, even heart failure and 40% of the portfolio was relatively flat and that was mostly our vascular business and our CRM business. And then the way we looked at it is to get our -- to get our med-tech to be best-in-class to be able to grow 12%, 13%, 14%.

We need to continue the strong growth rate of structural heart, EP, diabetes, et-cetera, but we had to find a way to accelerate the growth rate of our vascular and NCRM businesses. And we said, if we can get them, these are historically been flat growth markets. If we can get them to grow 5%, the way that would then work-out is that we'd be able to elevate our medtech portfolio to the to the mid-teens. So that's what we've been doing over the last couple of years and the team have been executing on that.

I think on the vascular space, what you've seen us do is kind of use a little bit -- a combination of organic and inorganic to accelerate and increase our participation in higher-growth areas, specifically in the peripheral side. So I think you started to see that we've been growing. This quarter was a good quarter. Our target was around 5% for our vascular business by having those -- by having stronger pipelines and portfolios in that more peripheral space. And you're seeing that now start to happen.

On the CRM side, you know, our big strategy here was organic and getting to launch a very comprehensive and be the leadlers -- sorry, leaders in leadless. So we launched a single-chamber a couple of years ago, launched a dual-chamber last year, going to get into conduct and pacing leadless also. And I think that you've seen that over the last two years, our CRM business has grown 7% and I think we can continue to extend that with the strategy that we're doing, which is to really lead-in this area.

I actually think that is probably the most underappreciated opportunities that we have in our portfolio. Know, look at it right now, you're asking a question towards the end of -- end-of-the call. But I think really what you're seeing is these businesses, the focus, the innovation, the execution, and now you're seeing those start to start to deliver on that strategy to bring these flat businesses up to at least mid-single-digit growth. I think there's -- I think the team doesn't like that I characterize them like that. So that's good. I'm glad that they think that they can do better than that. But we've got a lot of opportunity in those big areas and we think there's innovation to be had in those. So we feel-good about it.

Danielle Antalffy
Analyst at UBS Group

Thank you.

Michael Comilla
Vice President of Investor Relations at Abbott Laboratories

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

Operator

Thank you. And our last question will come from Matt Mixic from Barclays. Your line is open.

Matt Miksic
Analyst at Barclays

Hey, thanks so much for squeezing me in. Just maybe a follow-up here, given the tax guidance you gave for this year and some of the dynamics in US and overseas sort of tax policy, it would be great to get your perspective on maybe the direction of where those things are going and how we should think about them for having it?

Phil Boudreau
Executive Vice President, Finance and Chief Financial Officer at Abbott Laboratories

Thanks so much. Yeah, thanks, Matt. You know, there's a lot of narrative at the moment going on, but to your point and two kind of the guide that we referenced in our opening comments here, what we've reflected is all kind of current tax laws and guidance and geographic mix of where our business growth is coming from, which is about 150 basis-point increase in the midpoint of this guide. That increase in the guide is driven by the increased adoption or the rollout here of Pillar 2 as it's currently enacted in these countries. And so that's what we reflect. We continue to be a good taxpayer, compliant taxpayer, and we'll see how more of this narrative unfolds here. But currently, we're running the operations and reflecting kind of what's known and as Robert highlighted, absorbing this still within kind of the way we run the business.

Robert B. Ford
Chairman and Chief Executive Officer at Abbott Laboratories

Yeah, let me -- I want to add-in on that one, Matt. I think -- I think you'll hear this topic come up quite a bit. And if I just take a bigger-picture here, I mean, corporate tax rates tend to get hyper politicized and especially during election years and it's really not a political debate. In the business world, it's just an expense. It's just another form of expense. And in our world, when one expense goes up, you got to manage and other expenses have got to come down or maybe not increase at the same rate that they were increasing.

And I think what you'll find -- what you find sometimes is you get a small handful of companies that maybe have a really low tax-rate and then that viewpoint then gets unfairly applied to every one of large company -- every large company and then you get these predictable narratives of you know, companies that got to pay their fair share, et-cetera. The reality is most companies -- most companies pay their fair share and then some. I mean, I could talk about Abbott. We -- our cash taxes are over 20%, you know, and that's one thing that people never talk about is we use these kind of gap rates, but what really matters is cash taxes. That's the money that's going to be paid.

And -- but more importantly, US companies, companies like Abbott, we play a key role in making the US economy so successful. We're -- we're conducting a significant portion of the R&D in the US we invest billions of dollars in capital projects, which then drive -- this drive job growth. Our capex spend has increased over 60% over the last couple of years. We increased our workforce by 20%. And when you increase that workforce, you're investing hundreds of millions of dollars in employee healthcare and employee benefits.

So this Pillar 2 legislation, this pillar 2 rule here that got adopted, that's added. And we -- I think this rate that Phil's kind of quoted, that's an additional $200 million of expense. That's all it is, is $200 million of expense that is not going to investing in other areas. And what's even -- what's even more challenging is that of those $200 million, two-thirds of it is actually going to be paid taxes to overseas to overseas countries. So that's not really good policy for the US and so we're -- we're absorbing this. We're managing it. And I think as still said, there are a couple still some new policies or new issues that we have to kind of work on. But I think the overall goal here has got to be to ensure the competitiveness of US companies and US multinationals. And I'm hoping we can we can get to that during -- during the next 12 months or so.

Let me just kind of close then on the call. I think we had a really strong finish to 2024. We exited our Q4 organic sales growth with over 10% top-line, 13% EPS, as I said, finished at the higher-end of our range, expanded our gross margin, delivered what we said we were going to do. The pipeline continues to be highly, highly-attractive, steady cadence of a great new growth opportunities. And I think to Vijay's question, we've got a balance sheet that's going to provide us a lot of a lot of strategic flexibility. So I think we're really well-positioned to 2025. So with that, I want to thank you for joining us today.

Michael Comilla
Vice President of Investor Relations at Abbott Laboratories

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

Operator

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

Corporate Executives
  • Michael Comilla
    Vice President of Investor Relations
  • Robert B. Ford
    Chairman and Chief Executive Officer
  • Phil Boudreau
    Executive Vice President, Finance and Chief Financial Officer
Analysts

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