Abbott Laboratories Q2 2023 Earnings Call Transcript

Participants

Corporate Executives

• Mike Comilla, Vice President, Investor Relations
• Robert Ford, Chairman and Chief Executive Officer
• Bob Funck, Executive Vice President, Finance and Chief Financial Officer

Analysts

• Joshua Jennings, TD Cowen
• Larry Biegelsen, Wells Fargo & Company
• Danielle Antalffy, UBS Group AG
• Vijay Kumar, Evercore ISI
• Joanne Wuensch, Smith Barney Citigroup
• Marie Thibault, BTIG Research
• Matt Miksic, Barclays PLC
• Jayson Bedford, Raymond James

Presentation

[Operator]

Good morning and thank you for standing-by. Welcome to Abbott's Second Quarter 2023 Earnings Conference Call. [Operator Instructions]

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

[Mike Comilla, Vice President, Investor Relations at Abbott Laboratories]

Good morning and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer and Bob Funck, Executive Vice-President, Finance and Chief Financial Officer. Robert and Bob 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 2023.

Abbott cautions that these forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from those indicated in the forward-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 31st, 2022.

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 GAAP financial measure for organic sales growth on a forward-looking basis because the company is unable to predict future changes in foreign-exchange rates, which could impact reported sales growth. Unless otherwise noted, our commentary on sales growth refers to organic sales growth, which is defined in the quarterly results press release issued earlier today.

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

[Robert Ford, Chairman and Chief Executive Officer at Abbott Laboratories]

Thanks, Mike. Good morning, everyone and thank you for joining us. Today, we reported second quarter adjusted earnings per share of $1.08, which reflects an acceleration in the contribution from the underlying base business. Organic sales excluding COVID testing increased low-double-digits for the second quarter in a row and was led by mid-teens growth in medical devices, along with double-digit growth in Established Pharmaceuticals and Nutrition.

On our last couple of earnings calls, I've highlighted improving underlying demand trends across our businesses. The strengthening trends continued in both our institutional and consumer-facing businesses this past quarter. Within the institutional businesses, healthcare systems around the world that continued to improve their ability to expand the supply of healthcare services through ongoing efforts to adjust protocols, managed labor challenges and increased the overall available capacity to treat patients.

In our more consumer-facing businesses, we're seeing consumers prioritize spending for healthcare products, which is driving increased demand for our products in the US and internationally. I'll now summarize our second quarter results in more detail before turning the call over to Bob and I'll start with Nutrition, where sales increased 10% in the quarter.

In the US, growth was led by pediatric nutrition growth of more than 20%. We continued to make-good progress in increasing manufacturing production and have now recovered approximately 75% of the market-share in the infant formula business that was lost last year as a result of the voluntary recall. Internationally, total Nutrition sales grew 6%, led by growth in both pediatric and adult nutrition businesses.

Turning to Established Pharmaceuticals, sales increased 12.5% in the quarter. This strong performance was led by growth across several markets including India and China and therapeutic areas, including gastroenterology, women's health and CNS pain management. This business continues to execute at a high-level and capitalized on the favorable demographic and socioeconomic trends in emerging markets.

Moving to Diagnostics, excluding COVID testing, organic sales grew 7% led by Core Lab Diagnostics, where sales grew 10% driven by performance in the US, Europe and China. This broad-based strong performance reflects the increased demand for routine diagnostic testing globally. And in the US, our blood transfusion testing business continues to make good progress, recovering from the impact of lower plasma donations that occurred during the COVID-19 pandemic.

And I'll wrap-up with Medical Devices, where sales grew more than 14% on an organic basis, including double-digit growth in both US and internationally. In diabetes care, FreeStyle Libre sales exceeded $1.3 billion in the quarter and grew 25% on an organic basis. During the quarter, Libre became the first and only continuous glucose monitoring system to be nationally reimbursed in France for all people with diabetes who use insulin.

This achievement was a direct result of the unique value proposition that Libre offers, a fully featured continuous glucose monitor made available at an accessible price. Abbott has led the way in expanding reimbursement coverage for continuous glucose monitors in order to bring the benefits of this life-changing technology to more people around the world.

In Cardiovascular Devices, sales grew more than 10% overall in the quarter, led by double-digit growth in Electrophysiology and Structural Heart. In Electrophysiology, performance was led by international growth of more than 20%, which included high-teens growth in Europe and strong growth in China.

During the quarter, we received US-FDA approval for our Tactiflex Ablation Catheter, the world's first ablation catheter with a flexible tip and contact force sensing technology, which helps to deliver improved procedure outcomes and faster procedure types. In Structural Heart, performance was driven by MitraClip growth of approximately 10%, along with growth from several recently launched new products.

Earlier this year, we submitted for FDA approval for TriClip, our minimally-invasive tricuspid valve repair device that helps treat a condition known as tricuspid regurgitation, the leaky heart valve disease. The clinical trial data supporting our submission show that TriClip is a highly effective and safe treatment that provide a significant improvement in the quality-of-life for patients.

TriClip is currently being reviewed by the FDA and we look-forward to bringing this first-of-its-kind technology to patients here in the US. In Rhythm Management, growth of 8% was led by AVEIR, our recently launched leadless pacemaker. And during the quarter, we received FDA approval for our AVEIR dual-chamber leadless pacemaker, a first-of-its-kind technology that allows for two pacemaker devices to communicate with one another inside the body to provide minimally-invasive treatment for those with abnormal heart rhythms.

AVEIR was specifically designed to be upgradable and retrievable in order to evolve with patient changes in therapy needs over time. This unique technology offers the potential to revolutionize care for millions of people who require a pacemaker.

And lastly in Neuromodulation, sales grew 16%, driven by the recent launch of Eterna, our first rechargeable neurostimulation device for pain management, which targets a large segment of the market where we previously did not compete. During the first half of this year, we introduced several new innovations including the launch of Eterna and label indication expansions for treating painful diabetic neuropathy and chronic back pain for those who have not had or not eligible for back surgery.

So in summary, we exceeded expectations on both top and the bottom lines. Growth in the underlying base business accelerated driven by improving market conditions and contributions from both new products and legacy growth platforms. And our pipeline continues to be highly productive, which will sustain our strong growth profile in the future.

I'll now turn over the call to Bob. Bob?

[Bob Funck, 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 second quarter results. Sales decreased 9.2% on an organic basis due to as expected a year-over-year decline in COVID testing related sales. Excluding COVID testing related sales, underlying base business, organic sales growth was 11.5% in the quarter. Foreign exchange had an unfavorable year-over-year impact of 2.5% on second quarter sales.

During the quarter, we saw the US dollar strengthened somewhat versus several currencies, which resulted in a slightly more unfavorable 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 ratio was 55.4% of sales, which reflects continued flow through impacts from the elevated inflation we experienced last year on certain manufacturing and distribution cost, as well as an unfavorable impact from foreign exchange.

Adjusted R&D was 6.4% of sales and adjusted SG&A was 27.2% of sales in the second quarter. Lastly, our second quarter adjusted tax-rate was 14%.

Turning to our outlook for the full-year, we now forecast total underlying base business, organic sales growth, excluding COVID testing sales to be in the low double-digits. We're now forecasting COVID testing related sales of around $1.3 billion, which is below our full-year forecast of around $1.5 billion that we provided in April due to current testing dynamics, including lower demand for testing following the end-of-the public health emergency in May.

For the third quarter, we forecast COVID testing sales of around $100 million. Based on current rates, we expect exchange to have an unfavorable impact of little more than 1.5% on full-year reported sales. Lastly, our full-year adjusted earnings per share guidance of $4.30 to $4.50 remains unchanged, but reflects a lower earnings contribution from COVID testing sales compared to expectations in April, offset by raising our underlying base business, earnings forecast, by approximately $0.05 based on our strong performance and outlook.

Compared to the initial guidance we provided back in January, we have now raised our underlying base business earnings forecast by more than $0.15, offsetting the lower contribution from COVID testing versus our initial forecast.

Turning to our outlook for the third quarter, we forecast adjusted earnings per share to be approximately $1.10, which reflect strong growth on the underlying base business. We forecast total underlying base business organic sales growth excluding COVID testing sales to be in the low double-digit and exchange to have an unfavorable impact of a little more than 1% on our third quarter reported sales.

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

Questions and Answers

[Operator]

Thank you. [Operator Instructions] And our first question will come from Joshua Jennings from TD Cowen. Your line is open.

[Joshua Jennings, Analyst at TD Cowen]

Hi, good morning and congratulations on another strong quarter. The core business is generating nice momentum, gaining [Phonetic] sales growth, accelerating earnings power increasing. Robert, it would be great to hear your views first on the drivers of the back-half momentum as soon an updated low-double-digit organic revenue growth forecast for 2023. And then second, it would be great also to get your thoughts on the sustainability of this building momentum in 2024 as the business is creating some more challenging comps for next year. Thanks for taking the questions.

[Robert Ford, Chairman and Chief Executive Officer at Abbott Laboratories]

Sure, Josh. Yeah, it was a very strong quarter, broad-based growth and but listen, I still think that we can do better and I know my team, my team feels that also. If you go back a little bit in terms of couple of years when COVID was happening, we always said that, that there was a great hedge share for us, right? And when COVID would subside, we would have a strong base business and making investments in, I think that's what you're seeing right now play-out in these last couple of quarters and what we think is going to continue to play out throughout the rest of the year and going into 2024.

We saw very strong growth across all four sectors excluding the COVID testing piece of it. And as I said in my opening remarks, the institutional business, the consumer business, there was an acceleration from Q1 to Q2 growth versus Q2 of last year. So all the right indicators here trending positive and with great momentum. Devices and diagnostics that was nice step-up, I attribute that really good improving market conditions, whether it's the hospital systems, addressing some of the bottlenecks that they had in care, but also markets that are reopening and that trend continuing, but also new products. So market conditions as part of the new product launches also contributed quite a bit there. EPD has sustained I'd say high single-digit, low double-digit growth last two years and I think that, that continues. I think we're probably one of the best positioned large healthcare companies in emerging markets. We got a unique strategy there, lot of regionalization and lot of local for local and team does a really good job at executing that.

The double-digit growth in Nutrition was as expected. We're seeing the recovery in the pediatric business recovering our market share. My comment there, of the three quarters of recovery is more general and broad-based, but once you start looking at different segments of the infant formula market, different SKU sets and different types of format, there are certain segments where we've already back to leadership position, so that's moving all in the right trajectory and adult doing very well in several countries.

So COVID declined as we had forecasted, we decided to bring our COVID number down a couple of $100 million, because we're seeing as the public health emergency ended, we saw little bit of a decline in testing there. So we'll see how that's going to play out in Q4. It's probably the first quarter we'll see, Josh, of a -- of an endemic respiratory season. So we'll see how that's going to play out, but the base business is doing really well. And I'd say from a geographic perspective, it was pretty broad-based also across all geographies, US, Europe, Asia, obviously China reopening was really positive too, but it wasn't like this over-indexing in our growth rate with China opening. I mean if you look at our growth rate excluding China, it was -- it only added about a point of growth 11%, 11.5%.

So it's pretty broad-base across the market, so pleased with the top line, believe it's very sustainable, which is why we increased from at least high single to low double-digit growth rate. And I think the pipeline and the productivity is another kind of key aspect in our quarter, lot of product approvals and that's going to -- that's going to drive it. It's probably little bit early to kind of go through a specific guidance for 2024, but I think if you look at this COVID decline as anticipated COVID decline that we had this year, I think it's kind of overshadow a little bit about the strong and the strength and the performance in the base business and you're starting to see that number comes down in COVID, you're starting to see really the strength of the base business.

So, if you look at the base business, its contributing about -- its contributing about $4.10 of earnings for the full-year this year, that's about $0.15 higher to what we originally guided back in January. And I think that's pretty significant growth even at $4.10 on the base business and that's really been driven by top line. So you look at the leverage in the P&L, the investments we made during COVID, we're able to drive a lot of a lot of growth there, so pipelines delivering pretty significantly and I can see -- I believe that, that is the sustainability going into 2024 that top line. Of course, gross margin is a constant area of focus for us whether it was the impact of FX or the impact of inflation, but I'm already seeing three out of our four major businesses here showing improved gross margin profiles versus the end of last year. So we're seeing good, good momentum over there. So if I put this all into account, I think we are achieving a lot of growth top and bottom line, the new product contribution, strong pipeline and then the opportunity that will have for gross margin expansion, so I think we're well set-up as we go into the second half of this year and as we go into 2024.

[Joshua Jennings, Analyst at TD Cowen]

Excellent. Thanks so much.

[Operator]

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

[Larry Biegelsen, Analyst at Wells Fargo & Company]

Yeah. Good morning, thanks for taking the question and congrats on the nice quarter here. Just one for me, Robert, I'd love to hear your thoughts on the medtech plat [Phonetic] 5 and the pipeline, specifically how you're thinking about there, the dual-chamber approval and TriClip you mentioned earlier and just the sustainability of that 11% cardio, neuromod growth we saw this quarter. Thanks so much.

[Robert Ford, Chairman and Chief Executive Officer at Abbott Laboratories]

Sure, well that group of products, they did pretty well in the quarter. Combined those products, they grew about 40%, Larry. You know, if you take the Q2 run rate and annualize it, it's annualizing to about little over $650 million. I expect to do better than that in the year as the next quarter progress. Yeah, regarding your question on these products, I hope I can go, I can go through some of them here, I mean on the Aveir side, we saw a lot of, lot of positive development this quarter for leadless. If you remember, we received FDA approval for the single-chamber last year. And if you look at some of the claims data, at least the claims data that we're looking at, showing that we'd be able to capture about a third of that market, so that's doing -- that's doing really well.

But what's really exciting for us and quite frankly it's a lot of KOLs that I've spoken to especially at HRS [Phonetic] this year with the approval for the dual-chamber, which is a much larger segment of that makes up at least 80% of that $3 billion worldwide pace market. And it's the first ever technology, right, where you got two implanted devices communicating with each other. So it's a huge opportunity for us I think to really change paradigm here. It's a little bit of a different implant than what EPs have been accustomed to doing with pacemakers that have leads.

So our focus here at the beginning I think is really to look at the bigger part of the market and make sure that we do a really good job at creating a real-world kind of strong clinical results, making sure that the implant technique it's well-understood. And so we'll focus a lot on training and training physicians. We'll be opening new centers, of course, but we're going to -- we're going to -- this falls in the bucket, Larry, of just making sure that we go with the right tempo out-of-the gate, so that we got a bigger eye on the larger -- on the larger mark in the larger conversion, because I think that that's a huge opportunity for conversion over there. So, there I'm very excited about and the team is already starting their launch plan here.

Amulet grew 25% this quarter, which is a great growth rate. And again, we're also focusing on generating great real-world clinical results there, being thoughtful about how we open the accounts, build a strong sustainable position. This is a fast-growing market, it's a great opportunity for us and so that's done well. In TAVR, with Navitor, again our quarterly sales, we were looking at this the other day, our quarterly sales have roughly doubled in the last 18 months, now granted it's a smaller base, but I'm just hearing really good feedback from the implanters now once -- once Navitor is out, regarding the implant technique, regarding the outcomes. So I think we're building a really good position here, obviously, in the US, following the launch, but internationally seen real, real strong performance, whether it's market-share gains or our ability now to open new accounts with this new product.

And then TriClip is, we're seeing similar international performance. Physician enthusiasm here continues to -- continues to build as now they've got this much better, I'd say a real effective option here to treat patients that are suffering from TR. So -- and I think -- I think the publishing of the TRILUMINATE data earlier this year really gave a boost to those international markets. I mean we had clinical data out there, but the TRILUMINATE data I think really -- you can see this correlation in terms of what we're seeing in terms of implants there post -- post publishing that data. So, I'm excited to bring it here to the US. I mean we submitted to the FDA earlier this year, the clinical data that supported the submission as I said in my opening comments is really strong, great and great quality-of-life improvement. I'm enthusiastic about the opportunity in the US. I mean it's a PMA submission, we submitted it in that, we submitted in January. So we didn't -- we didn't necessarily bake in any kind of significant sales this year, but I think it's a great contributor for us -- for us next year.

So and then on Neuro, I mean this market moves a lot with innovation and we introduced quite a bit innovation, I'd say over the last six months in this market, there's great opportunity to execute on that and there's more to come also in that business too. So I look at the cardio, neuro business just with -- just with these products that we've mentioned here. These -- this group of products that we recently launched, billion dollar segments and that we're in the early innings. So, I'm excited about it and I think there has -- got lot of momentum and sustainability on our cardio, neuro business, Larry.

[Larry Biegelsen, Analyst at Wells Fargo & Company]

All right. Thanks so much.

[Operator]

Thank you. Our next question comes from Danielle Antalffy from UBS, your line is open.

[Danielle Antalffy, Analyst at UBS Group]

Hey, good morning, everyone. Thanks so much for taking the question and Robert I do have two product specific questions that you totally stole my thunder with that very thorough answer. But if I could follow-up on specifically Libre and MitraClip, so did the US deceleration in the quarter for Libre, just wondering what you're seeing out there, you have a competitor launching a new product, but you guys are launching Libre 3 and you do have the basal coverage for Medicare now, but how you see basal ramping, that's the first product question. And then the second question is on MitraClip and another -- quarter was fine, but this is a market that had been growing double-digits pre COVID, just curious about where you think this market falls out on a normalized basis once we're through staffing constraints, once we get through what feels like a little bit of a -- an air pocket in the patient population, given the high mortality rates through COVID. So those are my product questions. Thank you so much.

[Robert Ford, Chairman and Chief Executive Officer at Abbott Laboratories]

Okay, thanks. So on your Libre question, we had a really strong quarter there. We grew -- we grew 25%, yet 30% in the US. I think it's pretty strong growth still. And internationally, we're up 22%. So that's -- that's very -- that's very positive now that we've kind of put behind us some of the upgrading activities that we're doing towards the second half of last year, so you're seeing the impact there.

The basal, it's a great opportunity, in my comments I referenced France, this wasn't just like a tender award. The French authorities looked at claims data, they looked at data from basal users using the product, we got over about a 70 share of that market. So, they looked at it and say, wow, this is really having an impact. So, so that's good. It provides us great momentum. You look at -- now you've got US, Japan and France reimbursing for basal. I mean, those are three of the top five markets in the world, we're well-positioned there. US coverage began in April, so that's playing out nicely also.

So -- so I think we got great momentum here. I'd say what's really exciting is a lot of the upcoming launch activity and pipeline activity that we'll have in the second-half of this year. If you look at our integration with pumps, my understanding here that some time in this second-half we'll see Tandem integration with our CGM system here in the US and that will be exciting. One of the things that we've also got rolled-out and planning is as you might remember, we got L 3 approved, full ICGM, but together with that approval, we also got a 15 day claim. So we'll be launching our 15-day sensor here in the US second half -- in the second half of this year. So that's exciting queue and the team is -- the team is on-target here to start and initiate our glucose ketone dual sensor trial sometime in Q4 here. So, a lot of pipeline activity in the second half, probably the one that I'm most excited about, Danielle, is actually Libre 2 streaming. I think this is an incredible opportunity and what the team has -- has been able to do. I think it's the most exciting launch that we have in the second-half year, which is really our ability to convert our entire Libre 2 base from scanning to be able to have real-time streaming through an app update. We ran our first conversion in the UK over the weekend. There were some challenges there as we rolled it out, team worked over the weekend, but as of I think as of day, end of day Monday, 90% of the user base was converted and the social media post that I've been seeing are just incredibly positive. So, just think about our ability here to convert our entire L2 base into a -- into a slightly, smaller version of L3 across the world with all the manufacturing capacity we have, so I'm really excited about that. So I think Libre is on a great trajectory, great momentum and I do that's -- that's going to continue.

Regarding your question on MitraClip, yeah, I think the performance was -- I think it was pretty strong, 10% growth. International was up 20%. So US was more modest, so I think you pointed to some of the challenges that we are seeing. Not sure it's so much the staffing portion now then I mean I think it was probably in the second half of last year. We're not seeing that in the other parts of the business. I think the US piece is here is really, our ability here to reignite and restart that referral funnel here in the US, which was impacted by the pandemic. And I think this is going to take a little bit of time, but it's a key -- it's a key area of focus of the US commercial team here, is to really look the commercial and the clinical team to really start to restart those -- that referral process from the cardiologist into the hospitals. This is a -- continues to be an attractive growth area and you could see that where we don't have some of these issues here in the US. We're looking internationally to accelerate as a way to -- as a way to kind of balance it out and we're seeing great growth internationally here.

So the market is still very attractive. We're having a lot of success internationally and in the US, we're going to -- we're going to focus on, on this patient referral funnel here and I think we'll start to see kind of improvements in the numbers.

[Danielle Antalffy, Analyst at UBS Group]

Thank you so much.

[Operator]

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

[Vijay Kumar, Analyst at Evercore ISI]

Hey guys, thanks for taking my question and congrats on a solid front here. Robert, I had a two-part question. One, you did mention double-digit organic for the base [Phonetic]. Is that like should we worry about the comp issue for fiscal 2024 because I'm thinking about Lingo which I think is just launching, is that enough to sort of maintain some strength we're seeing. So, any comment on Lingo launch update on Lingo would be helpful. And my second part is on, gross margin is down sequentially. If I'm looking at 56% overall for the year, it looks like we're probably looking at bottom half of the EPS guidance. I know you had mentioned $1 billion of inflation impact. How should we think of that benefit and margin expansion in back-half of 2024? Thank you.

[Robert Ford, Chairman and Chief Executive Officer at Abbott Laboratories]

So yeah, I'll take the Lingo question and then I'll ask Bob to fill-in on the gross margin. On the Lingo piece, listen, this has been part of our strategy, Vijay. It wasn't some -- it was an afterthought, as we were building Lingo platform, we knew would be in a situation where can we expand beyond diabetes? We've been very thoughtful about it and very intentional about it. The opportunity during COVID to invest heavily in this was, what was our opportunity and as I've said in the past to be thoughtful about this, we had to create a separate group, a fully dedicated group. I was with them a few months ago. And if you look at the team, the scientist, the engineer, the data experts to marketing team, etc, they're just focused on this, but it's interesting their backgrounds here aren't necessarily with diabetes, right? They're more digital health, they're more consumer health and they've got this target, which is to do something that not a lot of well-established companies, healthcare companies do which is to create a product that's really targeting a healthy population and a healthy population that wants to stay healthy.

So, the product was launched yesterday in the UK, kudos to lease and the team for getting that through and the value proposition is pretty simple and I think that's how we needed to think about it for this patient segment here for this consumer segment, sorry. And it's really to deliver personalized like metabolic -- metabolic improvement and metabolic health. And the way it does that, Vijay, is that it's teaching you about glucose spikes. It's teaching the consumer about how your body reacts to food, how it reacts to sleep, how it reacts to exercise. And the goal is to minimize those spikes throughout the day.

So the Lingo coach, it learned - it first it learns about your metabolism, right and then after learns about your metabolism by wearing this sensor, then it signs you a daily target and we're going to call this the Lingo count. And this is basically a number that is the amount of spikes that you're -- that you're allotted to assigned to during the day and we're going to track that daily progress and track to that target and we believe that that's a great kind of behavior modification to for those that don't have diabetes.

They are charged, there's data, there's all that they 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, its direct-to-consumer. We are looking at opportunities for partnership, but its 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, its launched yesterday. We'll study, we'll learn from UK and then we'll roll it out to other markets. I'll pre-empt your question, which is always like, is it going to come to the US? Yes, it will, we intend to file in the US 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 us to be a significant contributor over time for us and so that, 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, Executive Vice President, Finance and Chief Financial Officer at Abbott Laboratories]

Okay. Yeah, so Vijay on the gross margin question, so back-in January, we guided a gross margin profile, 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 margins on our COVID tests due, really due to the significant decline in volumes that we've seen compared to our assumptions at the beginning of the year. So that's really what's -- 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, its a key focus area for us. Each of our businesses have gross margin improvement programs in-place, with teams that are dedicated to that to that effort. And as shows, we work in -- into 2024, we would expect to see some improvement overall in our gross margins.

[Vijay Kumar, Analyst at Evercore ISI]

Understood. Thanks, guys.

[Operator]

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

[Joanne Wuensch, Analyst at Smith Barney Citigroup]

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 US, how much of that is OUS and what do you think is driving that? And then I'll just jump-in with my second question which is, if you pre-claimed that 75% of the pediatric nutritional business, do you get that 100% or do you think you are more or less where you can get too? Thank you.

[Robert Ford, Chairman and Chief Executive Officer at Abbott Laboratories]

Sure. So really good growth on EP, we're up about 17% total. US was high-single-digits around 9%, international was about 24%. In that 24%, Joanne, there's probably about eight or nine 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 couple of quarters right now, we only got approval in the US towards the end-of-the quarter.

So, that's doing really well and it's really helping, we got really good feedback on the catheter. So growth is doing very well. The US was probably little bit impacted by kind of the capital cycle, if you remember last year, we launched [Indecipherable] it was like a very large bolus of kind of upgrading and capital placements that we're making. We get a lot of good feedback on the system, both from the users and from the administration, especially the fact that it's an open system. So, so that's done very well.

If you look at the consumable part of the US growth, it was up in the mid-teens. So that I guess the term uses tear apart the EP growth rate, but again it's a great market, we've got a great position and a good recovery and I expect to see this continuing throughout -- throughout this year. And sorry, what was your other question?

[Joanne Wuensch, Analyst at Smith Barney Citigroup]

The other question had to do with the 75% recovery in Nutrition, is that sort of your best-case or is there more to go?

[Robert Ford, Chairman and Chief Executive Officer at Abbott Laboratories]

I kind of made -- I kind of made my team and I also kind of said publicly that our target here is to get back to 100% of our market share by the end-of-the year. A big driver of that is the manufacturing and the manufacturing kind of ramp-up and we started -- we started the -- reopening manufacturing process in July for specialty of last year in August and September for non-specialty.

So that manufacturing has provide us the supply we need to fulfill the demand. We've got a very strong brand in SIMILAC and you're seeing that. So and as I said I think -- I think maybe to Josh's question in the beginning, if you look at the different segments, first of all, if you start with WIC and non-WIC, in the WIC segment, we're back to leadership position or back to our position we had before the recall and that was because we focused a lot in that Q3, Q4 time in that segment.

So I guess long-winded to say, yeah, I mean, we're still on-target for that to be able to get to the end-of-the year with our -- with our pre, pre-recall market-share. So and like I said if you pull-up, if you break-out some of the different formulas, because there's a lot of -- there's a lot of different SKU sets and different types of formulas and some of them we've already -- we're already back to where we were before recall. So, team is working really hard at this and I'm not -- I'm not changing that, I'm not changing that target.

[Joanne Wuensch, Analyst at Smith Barney Citigroup]

Excellent, thank you.

[Operator]

Thank you. Our next question comes from Marie Thibault from BTIG. Your line is open.

[Marie Thibault, Analyst at BTIG Research]

Hi, good morning and thanks for taking the questions. I wanted to ask a fairly high-level one here on the diagnostics business now that COVID testing is sort of behind us. Core Lab was really strong this quarter, I just want to kind of get an update on the areas of investment and growth in diagnostics testing today, the Alinity roll out, how that's progressing and whatever else in terms of tests or trends we should be paying attention to now in diagnostics?

[Robert Ford, Chairman and Chief Executive Officer at Abbott Laboratories]

Sure. I think we had a really, really, really good recovery here as the health systems are opening up, you're seeing that routine testing come back and like I said was pretty broad-based US, Europe, Asia, Asia without China, I mean it was pretty broad-based Latin-America. So that's working well. I've said the Alinity is, it's a multi, multi-year kind of cycle. If you look at these contracts, they are seven to 10 years. So, every year you got 15% that's coming up for renewal.

I've also said, we're trying to strike the balance between top line growth and gross margin and gross margin expansion and I think this is -- this is the range that we feel is the right range. We could probably accelerate that more with more placements of instruments and more capital, but you have some friction on your gross margin as you do that. So we're being thoughtful about how we make these placements and how we expand.

The -- one of the areas that recovered really nicely and I talked about in the opening comments was on blood banks. As you know, we're a market-leader over here. So as the blood bank business and as people come back to doing blood donations and plasma donations, we disproportionately benefit from that, not only here in the US and around the world. So our big focus here is really to look at the assays and the test that are missing on the menus and focus the R&D spend to be able to close those gaps and that was one of the areas that we did during COVID was while one portion of the diagnostic business is working on the COVID testing, the other group was receiving investment to be able to develop new assays to be able to layer on and that, Marie, is extremely, it's a very important strategic driver for us, because you got the capital that's been placed on the instrument, so we could add more assays to that, that comes with a, with a much higher-margin profile.

So that's our key area of focus. Molecular is an area of focus, we've been working on expanding the menu in molecular also. And then point-of-care, one of the most exciting assays that the team has developed for point-of-care is a rapid test for traumatic brain injury, so for concussion testing. We've got approved on a plasma sample, we're doing all the work to be able to get it on a whole blood sample which can then go through a CLIA Waiver test and then ultimately you've got now a handheld 15 minute test, blood test to be able to rule out a concussion that could be -- you can imagine the applications of that kind of test around the world, specifically a lot in terms of this country.

So that's a lot of our focus in diagnostics.

[Marie Thibault, Analyst at BTIG Research]

That's great. Congrats on a great quarter.

[Robert Ford, Chairman and Chief Executive Officer at Abbott Laboratories]

Thanks.

[Operator]

Thank you. Our next question comes from Matt Miksic from Barclays. Your line is open.

[Matt Miksic, Analyst at Barclays]

Hey, thanks so much for taking the question. One clarification on some of the topics came up earlier, just wanted to kind of pipeline question. So on, one of the things going on in CGM and wearables as you talked about, Robert and just to kind of separate these out, so we can understand exactly how this will play together maybe over the next 18, 24 months Libre 3, Lingo and sort of ketone, so Lingo you mentioned filing in here. Wondering if that's still ketones and lactates for that product and then there is a path forward that includes ketones for kind of the core CGM, lead [Indecipherable] and I have one just quick pipeline question if I could.

[Robert Ford, Chairman and Chief Executive Officer at Abbott Laboratories]

Sure, yeah, the Lingo -- the Lingo product that was launched yesterday, it was really starting off with a glucose only component to it. We had a lot of debate about this and we wanted to start-off simple. The opportunity to add ketones to that is definitely in the mix, Matt. There's going to be a lot of learning here for us as we like I say market a product to healthy population and there's going to be lot of learnings about that. But the idea as I laid out, let's see as couple of years ago is that we'll have a pipeline of different analytes that will come into this.

Lactate is on, lactate is on the -- is on the menu also, the team has figured that out. There's an interesting application for lactate both in the consumer market, but also in the institutional market for continuous lactate monitoring. So bottom-line, Lingo is -- it starts with glucose and then we'll be adding on different analytes as we go learning through that, but all of those opportunities are all there. And I actually think that there's going to be an opportunity as I've said with ketones in the diabetes space for sure and that dual sensor with ketones glucose is very strong for a specific diabetes population, but I also think it could be strong for a non-diabetes population also.

[Matt Miksic, Analyst at Barclays]

Great. Great, thanks so much. And then just on the pipeline, we hadn't heard much about what was happening with CSI post the acquisition and obviously you know important strategic fit add around peripheral and their platform is there, but they didn't have this IBL program that was kind of in-process, just wondering if you're ready to comment on where that is or when we might start to hear more about the progress there or your expectations for that? Thanks.

[Robert Ford, Chairman and Chief Executive Officer at Abbott Laboratories]

Yeah, listen the CSI closed this quarter, thank you for asking that. I think it's going to really have a strong impact as we look at our vascular business and really focus on the growth in the peripheral. You can see that we've strategically been adding either organically with our below the knee stent that we're working on, that's currently in trial and then all the inorganic moves that we've been making. So, that's very clear and we're super-excited about having the CSI portfolio at Abbott.

Yeah and you highlighted, one of the ones that as we're looking at it that we were super-excited about and the IVL product, I'll put in this way is, as we look and do a lot of the integration efforts and we did a lot of in St. Jude and we learned a lot. I would say from an R&D and portfolio perspective as part of that integration exercise, that's one that gets probably a disproportionate amount of attention and share of mind from us as we're doing the integration and as we're looking at the program and thinking about, you know with the program benefit, with additional resources, etc.

So I'm not -- I'm not prepared to comment on that right now, Matt, but rest assure that this one here is, is high and is high on my priority list as we -- as we're going through these next kind of quarters here of integration.

[Matt Miksic, Analyst at Barclays]

Excellent.

[Mike Comilla, Vice President, Investor Relations at Abbott Laboratories]

Operator, well I think one more question please.

[Operator]

Thank you. And our final question will come from Jayson Bedford from Raymond James, your line is open.

[Jayson Bedford, Analyst at Raymond James]

Good morning and thanks for taking the question. Maybe just on margins, it looked like there was a nice lift to base business margin. And I'm just wondering, is this all related to the improvement in infant nutrition or there other factors at-work? And then maybe just as a bit of a related question, you talked about the inflationary impacts on gross margin, I think we all understand that, but I'm wondering if you're seeing input costs actually to come down now and if so, when will we start to see that impact the P&L?

[Robert Ford, Chairman and Chief Executive Officer at Abbott Laboratories]

Sure, regarding the op margin profile, we're actually back to our pre-pandemic op margin profile. So that's, I think that's really positive. Obviously, the mix of how we get there is little different, we got little bit less gross margin for some of the points that Bob has raised here, but that op margin profile is really a combination of two things, I'd say. We made a lot of investments during COVID, I talked about them, we outlined them over the last couple of years. And as we go into this year, you're seeing this accelerated top line, we've seen a lot of leverage in the P&L because of those investments haven't had to make the kind of SG&A or R&D investments to be able to drive this 11%, 11.5% or low-double-digit top line growth rate. So that's one of the big drivers there.

Yeah, your question on infant formula, that obviously contribute as the product as we're recovering the share and the manufacturing is ramping-up again, but it's really a combination of all the areas, right, as the device business grows and grows disproportionately that has a -- that has a higher gross margin profile to. So I'd say it's really across-the-board on all the businesses. And this is an area of focus that we have. To your question on gross margin, this is our biggest opportunity, I would say maintaining this kind of growth rate and then looking at areas where we can improve our gross margins. Your point on employee costs are true. We are seeing certain input cost come down, certain commodities come down. And if we -- if we see that continue throughout going into next year, I think we'll have a great opportunity there.

One of the things that I wanted to make sure we focused on, going into this year was that, we had the inventory we need it to be able to capitalize on the opportunities we have from a top line perspective. And if you remember, Jason, second half of last year, supply-chain is really challenging and we had some challenges, right? And that -- those supply-chain challenges had an impact on our top line. So, going into this year, we told the team, so let's make sure we've got all the -- all the inventory we need to capitalize on these opportunities and one of the ways you do that is you got to lock-in, you got to lock-in your supply, you got to lock-in your volume, you got to lock-in your price.

So as commodities come down and we start to look at our contracts for next year, I think that will be a great opportunity for us as we go through it. So that being said, I'll just wrap-up here with a few -- a few closing comments. We had a -- we had a very strong start for the first-half of the year. We achieved double-digit, double-digit organic sales growth on the underlying business. We've done it for two quarters in a row now. The growth is broad-based. It's not focused on one specific area or one geographic area, it's across the entire portfolio and all of the areas have delivered great performance.

The pipeline has been highly productive and I think that's the key for us and for our strategy is to make sure that we're bringing new innovations to the market that can kind of sustain our top line and meet unmet needs for patients. We've raised the organic sales growth and the EPS guidance on the base business and EPS guidance in the base business is now forecast as I said in beginning that to be about $0.15 higher than our original guidance back-in January. So, momentum is building. We're well-positioned for the second-half of the year and heading into next year, so with that, thank you for joining us.

[Mike Comilla, Vice President, 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 AM Central Time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us today.

[Operator]

[Operator Closing Remarks]