Good morning, and thank you for standing by. Welcome to Abbott's First Quarter 2023 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott.

With the exception of any participants' questions asked during the question-and-answer session, the entire call, including the question-and-answer session, is material copyrighted by Abbott. It cannot be recorded or rebroadcast without Abbott's expressed written permission. .

I would now like to introduce Mr. Scott Leinenweber, Vice President, Investor Relations, Licensing and Acquisitions. .

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 risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements.

Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in Item 1A, Risk Factors, to our annual report on Form 10-K for the year ended December 31, 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 the comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at abbott.com..

Note that Abbott has not provided the 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. .

Thanks, Scott. Good morning, everyone, and thank you for joining us. Today, we reported strong results to start the year. First quarter adjusted earnings per share were $1.03, which is above consensus estimates, driven entirely by strong underlying base business performance, excluding COVID testing.

Organic sales growth excluded COVID testing increased 10% led by double-digit growth in Medical Devices, Established Pharmaceuticals and Nutrition..

As you'll recall, back in January, I expressed some optimism that the headwinds Abbott and other companies faced over the last few years were starting to peak and in some cases ease a bit. As we move through the first part of the year, that's exactly what we continue to see. Most notably, the impact of COVID has rapidly and significantly lessened.

As part of this transition, certain behavioral shifts have been evident across society. One simple illustrative example has been the significant increase in travel and tourism, we've all seen, heard about or experience firsthand..

A much more relevant and important behavioral shift that we're seeing in health care globally has been the increased priority people are putting on getting healthy and staying healthy.

And for our businesses, the impacts have been increased routine diagnostic testing volumes, improved medical device procedure trends and strong demand for consumer-based health products. The net results this past quarter was strong, broad-based growth across our portfolio. .

Importantly, this growing focus on health adds to and enhances other favorable demographic trends such as a global population that's growing older and living longer and increasing access to health care around the world.

Combination of these favorable market dynamics, along with the strength of our growth platforms and new product pipeline provides a strong foundation for sustainable, top-tier growth going forward. .

I'll now summarize our first quarter results in more detail before turning the call over to Bob. I'll start with Established Pharmaceuticals, or EPD, where sales increased 11% in the quarter. This continues EPD's impressive stretch of consistent strong performance, including double-digit growth each of the last 2 years.

Growth this past quarter was led by strong performance in Brazil, China and Southeast Asia and across several therapeutic areas, including cardiometabolic, gastroenterology, CNS and pain management..

Turning to Nutrition, where sales increased more than 10% in the quarter. In the U.S., Pediatric Nutrition growth of more than 35% included the impact of lower sales in the first quarter of last year due to a voluntary recall of certain infant formula products.

We continue to make good progress, increasing manufacturing production and recovering market share in this business. Internationally, total Nutrition sales grew mid-single digits overall, and sales in global Adult Nutrition also grew mid-single digits, driven by strong performance of our market-leading Ensure brand. .

Moving to Diagnostics, where as forecasted, sales growth was negatively impacted by a significant decrease in COVID testing sales compared to the first quarter of last year. Excluding COVID testing, organic sales growth was led by mid- to -high single-digit growth in Core Lab, Rapid and Point of Care Diagnostics.

In Core Lab Diagnostics, growth was led by strong performance in the U.S. and Europe, which was partially offset by soft market conditions in China early in the year, though we're seeing improving market demand over the last several weeks. Excluding China, Core Laboratory Diagnostics sales grew nearly 8% globally. .

And I'll wrap up with Medical Devices, where sales grew 12.5% globally on an organic basis, including mid-teens growth in the U.S. and double-digit growth internationally. .

In Diabetes Care, sales of FreeStyle Libre grew more than 25% on an organic basis in the quarter, including approximately 50% growth in the U.S. and mid-teens internationally. During the quarter, Libre received U.S. FDA clearance for connectivity with automated insulin delivery systems.

We're working with leading insulin pump manufacturers to integrate their systems with both Libre 2 and Libre 3 as soon as possible. .

In cardiovascular devices, sales grew more than 8% overall in the quarter. And impressively, organic sales growth rate improved sequentially compared to the prior quarter in every one of our cardiovascular device businesses. This broad-based strength was led by strong double-digit growth in Heart Failure and Structural Heart. .

In Heart Failure, sales of CardioMEMS grew more than 30%, which represents the third quarter in a row that CardioMEMS sales have grown more than 25%.

In Electrophysiology, performance was led by high teens growth in Europe, including strong, broad-based performance across big 5 European countries, which was driven by cardiac ablation catheters and mapping systems..

In Structural Heart, growth was led by double-digit growth of MitraClip, along with strong contributions from 3 recently launched products, Amulet, Navitor and TriClip, which combined to grow nearly 50% in the quarter.

And lastly, in Neuromodulation sales grew 11%, driven by a recent launch of Eterna, our first rechargeable neurostimulation device for pain management, which targets a large segment of the market where we didn't previously compete..

So in summary, we're off to a very good start to the year, exceeding financial expectations on both top and bottom lines. The strong performance we're achieving is broad-based and fueled by strong execution, new products and improving market conditions.

And our core foundational growth platforms have strong momentum and are achieving exceptional results, positioning us well for top-tier growth going forward..

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

Bob?.

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

Turning to our first quarter results. Sales decreased 14.5% 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 10% in the quarter.

Foreign exchange had an unfavorable year-over-year impact of 3.3% on first quarter sales. During the quarter, we saw the U.S. dollar strengthen 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 January. .

Regarding other aspects of the P&L, the adjusted gross margin ratio was 55.9% of sales, which reflects flow-through impacts from the elevated inflation we experienced last year on certain manufacturing and distribution costs as well as an unfavorable impact from foreign exchange.

Adjusted R&D was 6.4% of sales and adjusted SG&A was 28.3% of sales in the first quarter. Lastly, our first 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 at least high single digits.

We're now forecasting COVID testing-related sales of around $1.5 billion, which is below the full year forecast of approximately $2 billion we provided in January due to current testing dynamics we're seeing in the market..

For the second quarter, we forecast COVID testing sales of around $200 million. Based on current rates, we expect exchange to have an unfavorable impact of a little more than 1% on full year reported sales, which includes an expected unfavorable impact of a little more than 2% on second quarter reported sales.

Lastly, our full year adjusted earnings per share guidance of $4.30 to $4.50 remains unchanged, but now reflects a lower earnings contribution from COVID testing sales compared to expectations in January, offset by raising our underlying base business earnings forecast by a little more than $0.10 based on our strong performance and outlook..

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

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

Congratulations on a nice start to the year. So Robert, you raised the base business organic growth and held EPS flat despite lower expected COVID testing sales.

Can you please provide more color on the trends you're seeing across your businesses and geographies that allowed you to maintain EPS? And how does that feed into 2024? It sounds like you're thinking more about the base business, ex testing going forward? And I have 1 follow-up. .

Sure, Larry. I think that you summarized it pretty well there. We reduced our COVID forecast right now from $2 billion to about $1.5 billion, but maintained the previous guidance, and that was the result of a better performance that we're seeing in our base -- in our underlying base business.

I think that's actually a pretty great trade-off to have our base business have a raise of just over $0.10 here, offsetting this decline in COVID testing..

As I said in my comments in the beginning, Larry, back in January, we were seeing already some signs of a better environment, right, specifically in devices we're starting to see already the hospitals and the systems starting to get their handle on staffing shortages.

From an inflation perspective, we talked about some of the commodities starting to turn a little bit, not all of them, but some of them starting to turn..

So that's really translated, I'd say, in improving top line on the base business, better diagnostic testing, more procedures. I'd say if you look at the procedure trends throughout the quarter, if you look at cardio specifically of around 8%, you look at the way we exited February and specifically March, they were double digits in March.

So the real impact there was, I'd say, the reopening of China in January and the beginning of the quarter. That created a little bit of friction, but it was pretty broad-based across the systems in Diagnostics and Devices, U.S., Europe, Asia. We saw good performance in Japan also.

So that gave us a lot of confidence that we're on the right trajectory here..

And I'd say we're forecasting at least these high single-digit growth for the base business. And that's because of what we've been talking about over these last couple of years, which is reinvesting some of those COVID revenues and profits into the base business.

So we're able to drive accelerated growth through without having to provide extra funding, let's call it that way, to that growth. So I think there's a real strong start to the year to see double digits in Devices, EPD, Nutrition, we continue our recovery there. So it's a really good strong start to the year. I think it's very sustainable.

Of course, we're going to keep pushing and wanting more. But I think it's a good starting point. .

Regarding your 2024 question. I get it -- these last couple of years, Larry, usually in our first call, it's always about what's going to happen in the next year because of COVID. So I get that question.

I'd say right now, I'm not going to give any specific guidance, but if you look at our underlying base business, we're a little over -- right now, we're forecasting for this year a little over $4 of EPS. And we always start our planning process here as double digits. .

This year, we're forecasting really strong double-digit growth because like we've talked about, making those investments, getting the leverage through the P&L and not having to invest to get that additional earnings growth. And that's our starting point as we go into next year, targeting that double-digit EPS growth.

And I think it starts with driving a strong top line. And if we maintain a strong top line, which I'm sure we'll get into all the growth drivers here, I feel very good about them and the sustainability of them and the investment and the execution..

So we keep that strong top line. There's obviously work that we got to continue to do on margin and margin expansion, and that's a big area of focus for us. Those are really the elements here. Strong top line on the base business going into 2024 and targeting that double-digit growth with that top line and margin expansion. .

That's super helpful. Just for my follow-up, Robert, Cardio and Neuro was strong this quarter at about 8.5% organic. Can you talk about the trends there and the sustainability of that? There's still concerns in the investment community about your EP business with PFA competition coming. .

Sure. Well, like I said, I think the trends in the quarter were very positive. I think, like I said, I think it's a combination of improving conditions. I think the hospital systems have done a really good job right now at managing through the staffing shortages, and we're starting to see the impact there.

And then the combination of our product launches and execution of those product launches. Like I said, I think it was pretty broad-based across the geographies. And really, the only challenge we had was in January in China, but I think we're starting to see, again, a lot of growth in that market, too. So I think it's very sustainable. .

Regarding your question on PFA. Yes, I mean, I think it's an interesting technology. We've been working on it for several years now, Larry. And haven't been as public about what we're doing. That's probably driven by my direction to the team, but I think we'll share more about it at [ HRS ] this year in terms of everything we've done.

As a backdrop to that, I guess I would say one of the benefits of having a very large installed open mapping system based on the markets, we actually get to see these systems being used in real world. And it's a great product development tool to be quite honest with you. .

So a lot of our focus and the development of our program, Larry, is really looking at some of the gaps and some of the challenges we're seeing in these first-generation catheter systems and really looking at addressing those. So I think what the team has been working on is really unique and differentiated.

So I don't think that PFA will be the one tool to rule all tools. I think that it will be a tool that will be important. We're obviously working on our system. I think that the companies that are going to be winning in this space are going to be those that can effectively work with PFA and at the same time, work with RF..

So I think there are a couple of questions that are going to still need to be answered over the next 12 to 18 months, Larry. I think safety and efficacy is one that still needs to be -- we see certain signals in certain markets.

So those, I think, need to kind of work their way through the type of cases, type of patients that are going to be used with this product. I think one big question on the PFA is kind of can it actually improve real-world procedure times..

I think that's the big question I have in terms of what I've been seeing, what our teams have been seeing. And then given all the pressures that the health systems have is a 3x to 4x premium on RF, is that actually sustainable.

So bottom line, I think our device, cardio device portfolio is well developed across all the different areas of growth opportunities that we have. And I think that PFA is going to be an important technology that we've been working and investing on to bring to market and looking more as a second-generation product. .

Our next question comes from Josh Jennings from Cowen. .

Congrats on the strong start to the year. I was hoping to ask 1 question and related follow-up.

But what is -- Rob, just to help think through some of the core gross margin and operating margin trajectories from the core business with the COVID testing, volumes coming down and the historic margin contribution in the last couple of years, but I'd love to just hear about drivers of gross and operating margin expansion.

Like pre-COVID, we were thinking 50 basis points or up to 50 basis points of operating margin expansion was plausible for your business. And maybe just help us think through the trajectories, but also any leverage you can pull to support double-digit EPS growth trajectory in 2024, if there's some unpredictable headwinds that pop up.

I just have 1 related follow-up. .

Sure. I mean I think as I said to Larry, I mean, I think it starts with the top line, right, and being able to drive that top line and especially the top line coming from our med device portfolio, which obviously has margins that are accretive to the overall company.

So looking at the growth drivers there, whether it's the Structural Heart portfolio, the EP portfolio, Libre and Diabetes or recovery in Nutrition. I mean, I think these are all important areas of top line growth that will drive accretion to our margins..

One of the challenges that we all faced has been the impact of inflation on our input costs. And as I said, I think some of those are normalizing a little bit. I think last year, a lot of the focus was just to ensure that we had access to all the raw materials, right? And I think in those situations, we ultimately had to deal with elevated prices.

And I think that some of these will unwind over time. This is not a -- I don't think this is a quick fix, but it's definitely an area that we're going to see steady improvement over the next couple of years here in terms of improvement..

We've been able to take price where we can to offset some of those inputs, those cost input increases, but I think it's really the focus on the top line with our device portfolio that drives the accretion and then combined with focusing on our gross margin improvement programs, which we have across all of the businesses and that get the attention and the focus every month in our operating meeting.

So the combination of those 2 factors are what gives us confidence for that margin expansion. .

Mr. Jennings, please make sure your line is not on mute. .

I was on mute. I apologize. I wanted to just, related follow-up, you already touched on taking price, Rob. And would love to hear mostly on the device business, how pricing is shaping up in 2023. But also if you could touch on any other businesses where price is turning into a tailwind for your business that would be great to hear. .

Yes. I think on price, we've historically, as a company, our high single-digit growth really driven by volume, whether it's expanding markets or taking market share. I'd say on the device side, pricing historically has been a headwind for us. I'd say, over the last 12 to 18 months, it hasn't been one.

So we've been able to, at least, kind of hold pricing, I wouldn't say gone out and did big pricing increases, but at least being able to hold pricing. I'd say more on the consumer side of the business, Josh, is where we've been able to kind of take price.

If you look at our Nutrition business, we haven't been able to offset 100% of the commodity increase, but we've been able to apply some price increases globally across the portfolio..

In our Established Pharmaceutical business, there are segments of the market where it is more kind of cash pay. And we've been able to implement pricing increasing there. I think the team in EPD has done a pretty good job at how to implement those and still have good share positions across our therapeutic areas.

So those are probably the areas that we've been able to implement pricing increases.

And to your point on tailwind, if we start to see the commodities and some of the input costs come down, especially these more consumer-based businesses, I think the strength of our brands, whether it's in Nutrition or an EPD, there's an opportunity there to have that kind of tailwind. .

Our next question comes from Robbie Marcus from JPMorgan. .

Great. Congrats on a nice quarter here. Maybe to start, Robert, we just saw you get approval earlier this week for Medicare reimbursement for type 2 patients that use basal insulin for Libre 3. Clearly, a really big opportunity. But would love to get your thoughts on, first, how this impacts Abbott.

And then broader how you see improving reimbursement, both in the U.S., around the world evolving over the next few years and the benefit it could add to the Libre business?.

Sure, Robbie. I've talked about how this is an important part of the growth strategy and an important part of the market opportunity for [ CGMs ] as a whole. We've been investing and generating the clinical data to be able to kind of support this. So this is a great opportunity for us.

I'd say I talked about, there's about 4 million type 2 basal insulin users here in the U.S., about 1/3 of them are on Medicare. So it will start there.

I think we built a robust kind of position in this patient segment, and that includes not only the clinical data that we produced, but building a sales force that's focused more on the primary care side. I think the product lends itself very well to this patient population also..

So I think we're excited about the opportunity. I think I've sized it at about $1 billion plus in terms of opportunity in the short term here. And as the CMS reimbursement starts to play out, we know that there will be eventually a spill onto private payers here in the U.S.

It's difficult to forecast that because each plan will look at its own population and make its own determinations. But I think that provides a nice tailwind of growth over the next couple of years for this franchise. .

And I don't think it's just a U.S. situation. We're seeing other countries around the world also start to expand the reimbursement.

And it's a combination of both the clinical data that supports the use of CGMs on this patient group and also specifically, I'd say, for FreeStyle Libre the value proposition in terms of being able to support a larger group of patients have the benefits without necessarily having to have a significant premium, I guess, call it over that.

So we've seen markets outside the U.S. already kind of do that, and we're seeing good results in terms of its implementation. So I think it's a great opportunity for the category and more specifically for Libre. .

Great. And maybe a quick follow-up here. Structural Heart had been challenged throughout the pandemic, and here we are with a nice double-digit growth quarter from you.

Can you speak to -- is this the start of a strong recovery here? Anything in the quarter that feels durable to you? And then also, you had some, in my opinion, good TriClip data at [ ACC ] earlier this year. Your thoughts on how that might evolve over the year as well. .

Yes. I mean I think we've always looked at our Structural Heart portfolio over the -- at least the last 3, 4 years and made all the investments in terms of building a product pipeline, building commercial infrastructure globally in the market. So this is definitely an area of growth.

I think the entire portfolio looks really strong and really durable and really sustainable, Robbie, whether it's our position in mitral, our building of our position in the tricuspid area. We're entering the aortic area with Navitor seeing good momentum over there also. Amulet, the launch of Amulet also.

So I think we've really built a strong pipeline of products and commercial footprint here. So I think it's doing what -- this quarter, what we've always envisioned it to do, which is to be a top-tier growth contributor to Abbott. .

Regarding your question on TriClip, I agree with you, too. I was pleased with the results. I was pleased with the outcome. As I said in the past, I don't think it's a one study, and that's it. I think you have to continue to invest in generating clinical data. It's what we did with MitraClip. But the trial enrolled really fast.

And I think that's always a good sign in terms of the speed of enrollment, in terms of its acceptance and excitement from the physicians. And that's because there's not a lot of good treatment options for these patients..

As you know, traditional surgery over here has got a high mortality rate, and diuretics don't really work well. So I think the measures we saw in terms of the TR reduction, the quality of life improvement scores, I think they are probably some of the best that we've ever seen in a heart failure trial.

So the bottom line, I think these patients are in rough shape, and I think the physicians know this. So we feel good about the data. We've already submitted it to the FDA. So that's been submitted..

I know the CMS will probably review this in parallel. And I believe that click-based devices here are going to be the first option. They've got strong efficacy data and a very good safety data also. So I think -- you think it's good data, I think it's good data, too, and I'm cautiously optimistic here of bringing this product.

We're seeing great momentum in Europe. So that's a proof point here that I can tell you is a lot of great growth that we're seeing in Europe. .

Our next question will come from Rick Wise from Stifel. .

Sorry for my scratchy voice, a little bit. I was hoping we could talk about Diagnostic broadly ex COVID, you're thinking about what's next, broadly for the franchise as COVID wanes. But more specifically, we haven't had an [ Alinity ] update in a while. I know this is a multi-platform, multiyear rollout process.

Where are we in that process? How much more do we have to go? And any other diagnostic perspectives you'd want to share?.

Thanks, Rick. Yes, I mean, I think -- so the way we were thinking about Alinity and Alinity rollout, it was a multi-platform, multiyear rollout, right? If you look at these contracts, that you enter in there between 7 to 10 years. So you're really looking at 12%, 15% of the market that's up for renewal every year.

So we always looked at this as multiyear. It did take a back seat a little bit, I would say, during COVID as a lot of hospital systems weren't necessarily focused on RFPing their diagnostic, really just focusing on treating patients and doing the tests related to COVID.

So what we began to see, I'd say, probably middle of last year, definitely into the end of the last -- definitely into Q4 of last year and going into this quarter is those RFPs in that process are restarting back up again..

So -- and I think we saw this a little bit on our growth rate here, again, excluding COVID. And you look at our Core Lab business, which is the predominant base of our Diagnostic business, growing 7% if you take out China, which started off a little bit roughly in the 8%, which is the range that we tend to target here, Rick.

So I think we're restarting the process and reaccelerating it. I think it's going well..

I think we saw good growth in the U.S. and good growth in Europe and that's good. One of the areas that got impacted during COVID also was transfusion. So we saw a drop in donations during COVID. So I'm glad there was inventory in the blood banks to be able to deal with that.

But now we're starting to see donation start to ramp up again and the rebuilding of inventories and the picking up of donations. So I think that, that's also another positive sign..

And specifically on the blood bank side, our system Alinity s system, it really requires a lot less manual labor. There's a lot of automation in there. And I think that's something that we're seeing a lot from the blood banks as donations are ramping up again, the ability to take advantage of that increased demand with our system.

So I would say that we could probably grow faster than that, but I think it would come at some margin erosion because you're going to have to place a lot of boxes to be able to get to the double-digit growth..

So I think that this growth rate that we've established here 7%, 8%, 8.5% is the right growth rate where we can actually drive top line growth and at the same time, drive bottom line profitability. I think our margin profile in this business is probably one of the highest amongst the industry.

So I think the team has done a really good job at finding that right balance. So all in all, I think -- it took a little bit of break during COVID, but it's restarted right now, and I like the systems we have, the position we have and the commercial execution that's in place. .

Okay. That's very thorough. As a follow-up, I wanted to focus on Nutritional, but I'm going to also sneak in a quick CardioMEMS as well. Nutritional, it's great to see the 10% performance, the strong U.S. recovery. It sounds like you're making solid progress.

What's next -- when do we get back to normal in your view? And what is the new normal growth? And just to sneak in the CardioMEMS, jeez, I've been watching the CardioMEMS story, Robert, for over a decade back to St. Jude days. And I always thought it was great technology.

What's Abbott's special sauce that you're driving such a superb performance? And where do we go from here with CardioMEMS.

So why -- what's happening?.

I guess on the Nutrition side, I think the team has made a lot of progress. They work incredibly hard at this. Our manufacturing and our market recovery are in line with our expectations. I've talked about -- we've talked about this business being between 4% to 6% in terms of the target growth range, maybe towards the upper end of that range.

And ultimately, that's when everything kind of normalizes and you don't have some of these comps, that's what I expect this business to be in..

Regarding CardioMEMS, this has been a little bit of a journey for us. I think we found the right combination here of what I would call, making the investments that we needed to make on the clinical -- generating the clinical data and the clinical trial. We've obviously had an expansion in our label that happened last year.

But I think the biggest and most important part here is commercial execution on the ground and thinking about workflow in the hospital systems, right, managing that and addressing that and working with the hospitals to address this workflow has been probably the biggest impact that the team has had.

And then we're going to continue to invest in more clinical data and product upgrade. So I feel great about this product. .

Our next question comes from Vijay Kumar from Evercore ISI. .

Congrats on the [indiscernible] this morning, and I had 1 back, Robert, on this base EPS question. I think based on some of the numbers you disclosed, it looks like the base earnings EPS is about $4.10 in fiscal [ '23 ], excluding COVID testing.

Assuming base EPS grows double digits, historical average algorithm, we're looking at something like 450-ish for fiscal '24.

The variables here are of endemic COVID testing run rate, [ what if ] inflation coming down and capital deployment assumptions, right? So if you could just parse out, is $250 million, $300 million like a right number for endemic COVID testing.

And what is your current inflation -- total gross inflation that Abbott has taken a hit on versus prepandemic? And what part of that inflation is coming down? Or could there be some pricing offsets in that cap deployment?.

Sure. So I think you've got the numbers kind of in the right direction there, Vijay, if I followed all of that. And I would say, as I said, that primary driver of that is going to be the base business performance driving that growth. Regarding COVID for 2024, listen, I'm going to need to see a little bit how the testing environment evolves.

We brought down the forecast for this year based on what we're seeing. I'd say there's very little public investment, I would say, in testing..

So it's mostly now a private market. I think we do very well in that segment with the brand that we've built, not just here in the U.S., but overseas also. But it might be a little bit early to try and forecast what COVID is going to be next year.

But I think the number you threw out there of a few hundred million dollars is maybe a good starting point. But again, we're going to have to see how that evolves during the year. Regarding your inflation question, I'm going to ask Bob to address it. .

Yes. Vijay, so we saw a lot of inflation, which we talked about on the last few calls, really hitting us last year, it was probably tuned around $1 billion.

We saw some carryover inflation there into this year, but we've essentially been able to offset that through some of the gross margin programs we have across our businesses, which Robert talked on as well as taking some price in some of the areas of the business, again, with more consumer-facing businesses.

So we've really been able to kind of mute that carryover inflation this year, but we still have probably about $1 billion, call it, 240, 250 basis points worth of -- where the headwind currently sitting in our gross margin. .

Understood. And then sorry, Robert, capital deployment, I think CSI acquisition, people thought was on the smaller side. How are you thinking about capital deployment? And then one on product side. The Libre U.S. number, 50% was a big number.

Is there anything from a competitive perspective that's going on? Is Abbott gaining share? Or is this the underlying market growth?.

I'll talk about us. I mean I think the 50% growth there is pretty strong. We've been at this rate for couple of quarters now. I think it's a combination of our product launch and our execution and expansion of the market.

So I think the 50% here is -- like I said, I don't know what the other manufacturers are going to -- are seeing, but that 50%, I'd say that's our growth rate. And so I think it's doing very well. Sorry, what was your first question? It got... .

On cap deployment, cap deployment. .

Yes. I mean I think you guys almost feel like you want to have like some sort of model from us in terms of how we do this. I guess the best model -- the only model that we're looking at is what's the best return for our shareholders here. And what we found is having this kind of balanced approach where we're committed to a strong and growing dividend.

We make the investments in our organic opportunities to drive organic growth. And we've been doing those in Med Device, in Diagnostics, in Nutrition. .

And if there's an opportunity for M&A, to able to add to the portfolio, then we'll do that. And we announced the -- our intention to acquire CSI. And I think it was fit exactly our criteria here, Vijay, which is -- it's a great strategic fit, wanted to build more of a position in the peripheral side. You've been seeing what we've been doing.

We acquired a thrombectomy company about 1.5 years ago, now looking at atherectomy with CSI. So it's a good strategic fit..

They have a strong position in a growth area that we like, and we believe that we can add value and the deal made sense financially for the company. So that kind of fits into our framework of how we look at M&A and how I've talked about it.

So the allocation is balanced, and we'll look at what's the best return for our shareholders as we allocate the capital. .

Our next question comes from Joanne Wuensch from Citi. .

Nice quarter. A couple of catch-up questions. Can you update your guidance and thoughts on interest expense, and where you are on share purchases in the quarter and plans for the year? And I'll toss my real question in.

EPD, another quarter of double-digit growth, what is driving that? And in your view, how sustainable is that in a potentially recessionary environment?.

Okay. I'll take the EPD question here. Listen, I think that this is a -- we've been doing this for many years here, I would say. I think we've carved out this, I talked about this, nice little space for us in the global pharma market, which is, I call, fast-growing emerging markets with a branded generic focus. There's a way of how to operate in this.

It's not operating the way you would operate with proprietary pharma. And it's different from operating in pure generics. .

And I think that what you're seeing now is really an organization that has kind of figured out the right sweet spot on how to execute on this strategy. And you're seeing the results over the last couple of years. We tend to really focus on local for local.

We pick the right markets, and we develop portfolios that are relevant for those specific markets by having local R&D, local manufacturing. So that's done very well for us. And I think the team has done a really good job at driving profitability. So not just the top line, but also the bottom line. .

One of the challenges here, Joanne, is obviously FX, but they've actually -- this group has actually driven absolute dollar profit growth in the business. So I think they've figured out how to do this really well, not just with portfolios, but also channels and integrating that. It is a very unique model.

And I think the team have done a really good job at understanding it. .

From a geography perspective, I mean, in my opening comments, a lot of growth in Southeast Asia, a lot of growth in Latin America for us and great growth in India, too. As you know, we've got a large business in India there, too. So I think it's working very well. And I think it's very sustainable, too, given the dynamics of these markets.

Regarding your question on interest... .

Yes. So Joanne, in terms of kind of net interest expense for the year, we're forecasting a few hundred million dollars there. And then you had a question on share buybacks. As you know, historically, we do buybacks to offset dilution. And so we did some buybacks in the first quarter, again, a few hundred million dollars' worth of buybacks. .

Operator, we'll take 1 -- go ahead. .

Our next question will come from Danielle Antalffy from UBS. .

Just a question on specifically 2 components of the Structural Heart business. The first being MitraClip. Robert, just curious about what you're seeing in that market. That was a market that was severely impacted by both COVID mortality and hospital staffing constraints.

Just curious about where you think we are in the recovery specifically in that market? You did seem to put up another decent growth quarter this quarter. And then I have 1 follow-up on Amulet. .

Sure. I think it was double-digit growth in the quarter. I think what we saw there was continued international momentum, and I think that's a great opportunity for us is to be able to expand the technology internationally.

We have a new manufacturing site that we invested in, that's up and running, and I think that will give us the opportunity to be able to expand this more internationally. So I think that's a great growth driver for us. .

And then recovery in the U.S. As I said, I think some of the systems have figured out how to manage the staffing shortage, our teams play an important role in that also. So I think that -- listen, I'm cautiously optimistic here that this part of the ramping up of MitraClip has been addressed.

From our side, we continue to focus on driving the patient referral funnel. I mean that was probably one of the areas that got shut down that we were starting to build. So I'm starting to see good momentum there on building those patient referral funnels. .

Okay, that's great. And then on Amulet, the question I have there is really about where you think you are in the launch. I mean that's a product that very high growth market. But let's be honest, you launched, I think, that product during Omicron right? So just curious about how you would characterize where you are in the launch of Amulet. .

Yes. And listen, it's going well. We've got a nice kind of ramp. I guess I wanted that ramp to be a little bit more vertical. I would say one of the challenges we face there is exactly like you said, it's difficult to launch a product right into the pandemic. We saw that with a couple of products also.

But I think that the team has done a really good job here of being thoughtful about how to build a strong and sustainable position in the market. We're not in the entire market. We haven't gone out and launched into all the accounts.

But the accounts that we have launched into, Danielle, we're actually seeing roughly about a 25% market share into those accounts..

So I think that's the right kind of base to work off from ensuring that the accounts that we're in, we're starting to see repeat usage, continued usage, expanded usage. And as we start to see more of that, then we'll start to ramp up and start to go to new accounts. So I think this is an exciting area for us.

Yes, I would want it to be a little bit more vertical in terms of its launch, but I'm very optimistic about the product, about the team, about the position that we built in. So -- and we're investing in it, right? We've got our CATALYST trial here that's enrolling pretty well, too, comparing Amulet to NOACs.

So I think this is a great opportunity, a great area of investment and growth for us. .

Operator, we'll take 1 more question. .

And our last question will come from Matt Miksic from Barclays. .

Thanks so much for squeezing me in. So you covered a lot of ground, obviously, out of here.

So maybe, Robert, if I could just ask -- just 1 follow-up on your comments this morning, which came across, I think, to most folks as noticeably more bullish and encouraged by what you saw in Q1? And maybe just recognizing that investor expectations have also risen a bit throughout Q1 as checks and everything came in during the quarter.

But would you describe what you're seeing in the environment as something like a volume recovery or some other companies have used this backlog concept or something that might is strong now and may ease whenever, later in the year? Or is what you're seeing maybe something more general in terms of lifting productivity and volumes that could be more sustainable?.

Yes. I guess the way I'm seeing this, and I've traveled quite a bit during this first quarter, and I made the statement in my opening remarks.

I sense in talking to systems and talking to consumers, again, not just in the U.S., but around the world that there is this focus now of, okay, COVID is behind us, but I want to stay healthy, I want to get healthy, and I want to stay there.

So as it relates to procedures, what I'm seeing is people say, listen, I've been putting this off not because of COVID, not because there's some sort of backlog. But I've been putting this off for a couple of years, I want to go and address this.

Or on the consumer side of our products, whether it's EPD or Nutrition, we're seeing, again, a lot more focus on, okay, I'm going to spend some of my disposable income on these products, on these health products. .

So I don't see this as like a backlog aspect here that we're going to work our way through. Maybe there's some areas or geographies that you might have a little bit of that. But we tend to -- on the procedure side, we tend to work with the systems and we play a role and preplanning this procedure. So we have a sense of what the funnel is.

And I don't see like this oversized funnel over here because of a backlog. What I do see is more funnel just because people are wanting to invest in their health.

And on the flip side of that is I think the systems have figured out whether it's in diagnostics or whether it's in cardio procedures, they figured out how to deal with some of these staffing issues that I don't think are -- will ever be back to normal. .

So I think that what you're seeing are systems, obviously, addressing some of the shortfalls, but not just by hiring, but also using technology, working with companies to figure out how to offset some of that delta and labor shortage. So I think this is very sustainable.

And I think you're seeing some of the companies that are reporting -- yesterday, I think we saw some companies report talk about growth and procedure [ change ]. So I think it is sustainable. I don't think it's a bolus of backlog, so at least that's how we're seeing it, at least on our products..

I'll just wrap up here then. I think like I said in my comments, I think we're off to -- we're definitely off to a very strong start to the year here. Growth in our underlying base business has accelerated, and it's strong, and it's across the board, whether it's the different product groups, platforms or geographies.

We're now forecasting at least high single-digit growth in our underlying base business year. And I think this is a pretty unique and differentiated growth profile. Part of it is market conditions improving, but I also think part of it is our new product pipeline that continues to be highly productive.

So we're really pleased with how we started off the year. And with that, we'll wrap up, and thank you for joining us. .

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

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