Abbott Laboratories Q4 2021 Earnings Call Transcript

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Provided by Quartr
January 26, 2022

Key Takeaways

  • Abbott delivered 23% organic sales growth in 2021 and ongoing EPS well above its prior $4.00 guidance, raising its 2022 EPS outlook to at least $4.70 and targeting high single-digit organic sales growth excluding COVID testing.
  • Its Nutrition segment grew nearly 6% in Q4 (7.5% for 2021), led by adult nutrition brands Ensure and Glucerna and pediatric leaders Pedialyte and Similac, with new plant-based, lower-sugar and high-protein launches expanding the portfolio.
  • The Medical Devices business grew 16% in Q4, driven by Diabetes Care’s FreeStyle Libre (35% growth to 4 million users) and upcoming rollout of Libre 3, alongside FDA approvals and expanded reimbursement for structural heart and neuromodulation products.
  • Diagnostics COVID-19 testing generated $2.3 billion in Q4 (about 90% from rapid tests such as BinaxNOW), with ongoing strong demand prompting major investments in US and international manufacturing and the placement of over 3,000 new Alinity instruments.
  • Abbott expects about $500 million of gross-margin pressure in 2022 from inflation and supply-chain challenges (plus a ~2% FX headwind), with consumer price increases and margin-improvement initiatives built into guidance.
AI Generated. May Contain Errors.
Earnings Conference Call
Abbott Laboratories Q4 2021
00:00 / 00:00

There are 10 speakers on the call.

Operator

Good morning and thank you for standing by. Welcome to Abbott's 4th Quarter 2021 Earnings Conference Call. Call. This call is being recorded by Abbott. With the exception of any participants' questions asked during the question and answer session, the entire call, call, including the question and answer session is material copyrighted by Abbott.

Operator

It cannot be recorded or rebroadcast without Abbott's expressed written permission. Call. I would now like to introduce Mr. Scott Linenweber, Vice President, Investor Relations, Licensing and Acquisitions.

Speaker 1

Good morning Thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer and Bob Funk, Executive Vice President, Finance and Chief Financial call. Robert and Bob will provide opening remarks. Following their comments, we will take your questions. Before we get started, some statements made today may be forward looking for purposes of the Private Securities Litigation Reform Act call of 1995, including the expected financial results for 2022.

Speaker 1

Abbott cautions that these forward looking statements are subject call. Statements, economic, competitive, governmental, technological and other factors that may affect Abbott's operations are call discussed in Item 1A Risk Factors to our annual report on Form 10 ks for the year ended December 30 course 2020. Abbott undertakes no obligation to release publicly any revisions to forward looking statements call 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

Speaker 2

portion. With that, I will now turn the call over to Robert. Thanks, Scott, and good morning, everyone, and thank you for joining us. Today, we reported another strong quarter and highly successful year for Abbott. For the year, we reported organic sales growth of 23% and ongoing earnings per share of We set last January.

Speaker 2

These last couple of years have truly been unique on many levels. The challenge throughout the pandemic has been the sheer breadth of its impacts. And for Abbott, it's reinforced the value of our diversified business model, innovation cycles across our businesses and geographic footprint. We've always said that our business model Never has this been put to the test more so than over the past couple of years. It's been tested by a major global pandemic has proven to be highly resilient, delivering strong growth and returns for our shareholders.

Speaker 2

COVID testing has been a big part of this, of course. Delivering strong growth across our businesses, while continue to expand our portfolio with innovations that will fuel our success for years to come As we announced this morning, we forecast ongoing earnings per share of at least $4.70 We forecast organic sales growth for our base business, excluding COVID test in the high single digits. And our guidance includes an initial COVID testing sales forecast of $2,500,000,000 We're seeing very strong demand for testing to start the year with the recent emergence of the Omicron variant. And as you know, forecasting COVID testing demand compromises sales that we expect to occur in the early part of the year and we'll update this forecast 1 quarter at a time over the remainder of the year. And I'll provide more details on our 2021 results before turning the call over to Bob.

Speaker 2

And I'll start with nutrition, where sales grew nearly 6% in the 4th quarter and over 7.5% for the year. Adult Nutrition delivered 9% growth for the quarter and double digit growth for the year, led once again by Ensure, our market leading complete and balanced nutrition brand and Glucerna, our leading diabetes nutrition In pediatric nutrition, U. S. Sales growth of more than 10% for the year was led by strong growth of Pedialyte, our oral rehydration brand and market share gains for Similec, our market leading infant formula brand. During the past year, we continue to expand our nutrition portfolio with several new product and line extensions, including the launch of questions such as plant based, lower sugar and high protein products.

Speaker 2

Turning to medical devices, we're Continued recovery from the impact of the pandemic and strong growth in Diabetes Care drove sales growth of 16% in the quarter and nearly twenty quarter. In Diabetes Care, sales growth of nearly 30% for both the Q4 and full year was led by Freestyle Libre, our market leading continuous glucose monitoring system. Libre sales grew over 35%, which portion. Expanded Medicare reimbursement coverage for MitraClip will make it possible for more people to benefit from this life changing technology. We launched NeuroSphere Virtual Clinic, a first of its kind technology that lets patients communicate with physicians and receive new treatment settings remotely.

Speaker 2

We received U. S. FDA approval for Amplatz or AMOLED heart device, which treats people with atrial fibrillation portion. Moving to established pharmaceuticals or EPD, Strong performance was broad based across several countries led by India, Russia and China. EPD has performed well throughout the pandemic fueled by strong I'll wrap up with diagnostics where COVID testing was a big part of the story, but far from all of it.

Speaker 2

COVID testing sales were $2,300,000,000 in the 4th quarter with rapid testing platforms, including BinaxNOW in the U. S, PANBIO internationally and ID. NOW globally compromising approximately 90% of those sales. Demand for testing continues to remain strong and we remain committed to help ensure broad access. Since the start of the pandemic, we've invested significantly to build both U.

Speaker 2

S. And international manufacturing supply chains and we're working to expand and expand test menus across our platforms. During the year, we placed more than 3,000 Alinity instruments for immunoassay and So in summary, 2021 was another highly successful year for Abbott. We continue to play a vital role in combating COVID-nineteen as a result of our massive scale we built in rapid testing capacity. And we continue to strengthen our overall strategic position with a steady cadence of important new products

Speaker 3

portion. As mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis, which excludes the impact of foreign exchange. Turning to our results. Sales for the 4th quarter increased 7.7% on an had an unfavorable year over year impact of 0.5% on 4th quarter sales, resulting in total reported sales growth The adjusted gross margin ratio was 57.7 percent of sales, adjusted R and D investment was 6.3% of sales quarter with our revised full year effective tax rate of 15.5%, which is modestly higher than the estimate we provided in October call due to a shift in the mix of our business and geographic income. Turning to our outlook for the full year 2022.

Speaker 3

Today, we issued guidance for the full year adjusted earnings per share of at least $4.70 For the year, portion of these sales expected to occur in the early part of the year. We'll update our COVID testing sales forecast quarter. Percent of sales for the year, which reflects our forecasted business mix, underlying gross margin improvement initiatives across our businesses, portion of the year. Turning to our outlook for the Q1. We forecast adjusted

Operator

And our first question comes from Larry Biegelsen from Wells Fargo. Your line is open.

Speaker 4

Thanks for taking the question and congratulations on a really strong finish to a strong year. Robert, can you talk about how you thought about the call. 2022 guidance. Why is $2,500,000,000 for COVID testing the right starting point? And how are you thinking about Reinvesting the upside from COVID testing implied in the $4.70 EPS guidance?

Speaker 4

And I had one follow-up.

Speaker 2

Sure, Larry. I'd say at the beginning of the year, you're coming into the year and You're trying to find the right balance, right? You're trying to find the right balance on your long term growth opportunities that Abbott has, which I think Pretty unique and balancing that with, I'd say probably some uncertainty. And I'd say Every year there's a little bit of uncertainty beginning of the year, but I'd say this year is probably a little bit more than usual. So you're trying to find that balance.

Speaker 2

I'm pretty sure we'll talk about some of the long term growth opportunities. But if you think about some of the challenges in forecasting right now, call. There's a lot of dynamics that are existing from a macroeconomic standpoint that are out there That quite frankly aren't necessarily unique to Abbott, but that are out there, whether it's the pandemic, and The duration of the current surge, potential new waves and how long they will last, Staffing shortages that we've seen for the hospital base kind of part of our business, quite frankly, patient willingness to go in, to do a procedure during the surges. So that's probably one kind of big bucket to look at. Another area obviously on the macro side is supply chain and inflation challenges that every company is facing, and obviously currency headwinds.

Speaker 2

So I'd say those are all challenges that are facing a lot of medtech companies, companies in healthcare and quite a lot of companies outside of our sector. Probably what's a little bit different for us, another fact to consider in our forecast is just COVID testing. And how is that going to play out throughout the rest of the year given the magnitude of what the testing could look between it completely going away or it's staying or increasing at this level. So factoring all those contemplating not only some of those challenges, but also contemplating on the flip side, a very strong underlying kind of Abbott based business, as I said in my comments, high single digit growth. So there are definitely acceleration In a lot of our portfolio versus where we were pre pandemic, we've got investment in this guidance To be able to support, not only all of our launches that we engaged in, towards the end of Last year, beginning of this year, we've got launches and opportunities and that's all been contemplated and fully funded.

Speaker 2

And the initial COVID testing forecast of 2.5, I don't expect COVID to simply go to 0 Starting in the Q2. But the challenge of forecasting the magnitude, I felt This is the right way to and quite frankly, I talked about this in October, we will be updating it as we go along. We've got a lot we've built a lot of capacity. You've seen that over this like last year and a half, especially in rapid testing. So we have that capacity and we'll be updating it.

Speaker 2

Question. If we had typically done our $0.10 range guide here, Larry, our consensus, we would have been right in the middle of where you guys are at. But I didn't want to cap the upside, which is why we're at the least $4.70 So if I I'm going to sum it up. I look at our guidance now and it's okay. We've contemplated as much as we can of some of the challenges that a lot of companies are facing, Whether it's supply chain, duration of pandemic, medical device procedures, etcetera, I've fully funded our growth platforms provide that upside.

Speaker 2

So I think that's probably the best way to summarize it. It's de risked, it's fully funded for long term growth opportunities and we've got potential upside as we go into the remainder of the year.

Speaker 4

Portion. That's super helpful. Robert, just for my follow-up, Libre had another remarkable year. How are you thinking about Libre growth in 2022? And what are the drivers of that growth this year?

Speaker 4

Thanks for taking the questions.

Speaker 2

Sure. Well, yes, I mean you saw it. It continues to grow at a very strong rate and a very large base, 35% over 35% this year, 4,000,000 users now. We've initiated Geographic expansion of Libre 3 and that will start in the next couple of weeks moving out of Germany Into UK and France, those are probably kind of key markets that we're expanding over the next couple of weeks. And If I think about 2022, Larry, I mean I'm looking at here strong double digit growth.

Speaker 2

We've been growing about $1,000,000,000 of incremental sales per year and I expect that growth to be at least in that range. Portion. So that probably translates into a 25% growth. I think the biggest driver for us It's quite frankly not just this year, but as we look forward, it's still very underpenetrated, I'm talking about being a leader in terms of patients with 4,000,000 users where we've talked about numbers between 60,000,000, 70,000,000, 80,000,000 people portion. We've got continue to be international.

Speaker 2

The CGM penetration internationally is still much lower than in the U. S. Kind of look at the type 2s on single injection therapy. So we got great opportunity there. U.

Speaker 2

S, I would say is another good opportunity for us. We had very good year this year, close to like 60% I think that's the number. Now over a 1000000 users, we've made the investments that we need to make Last year in terms of sales force and advertising, and that's paying dividends. In terms of new users, we continue to Have a high share of new user growth. So as a combined, what we're doing internationally, expansion of Libre III, continued growth in the U.

Speaker 2

S, expanding into a pretty under penetrated population of type 2s. And I think we've still got like I've kind of said, still in the early innings of the Libre story here.

Speaker 4

Thanks so much, Robert.

Operator

Thank you. Our next question comes from Robbie Marcus from JPMorgan. Your line is open.

Speaker 5

Great. And I'll also add my congratulations on Nice quarter. 2 for me. I'll ask them both upfront. First question, maybe you could spend a minute on Cadence throughout the year.

Speaker 5

Q1 has a lot more COVID testing sales than we had thought, but also implies somewhat of a different cadence than we've been thinking. So just top and bottom line, what are the impacts there? How is inflation FX hitting And then second question is probably tied into it. If you could just touch on what you're seeing in current device and procedure trends as we sit here today and how you're thinking about the evolution of that over the course of 2022? Thanks.

Speaker 2

Your first question has got multiple sub questions there, Robbie. So let me take the first one and then I'll go back. So let me take the second one and then I'll go back to your first one Because it does contemplate some of the challenges on inflation that might be worthwhile spending some time just talk a little bit about also. But in terms of demand dynamics, Especially in the more hospital based business here, Ravi. We saw a real nice trajectory recovery in the beginning of Q4.

Speaker 2

We were and I always like to compare versus 2019, at least for 2021 to avoid some of the comp pieces. So we were improving our growth rates in our probably more cardio like businesses. Let's use that as a proxy It will be in that kind of 3% to 4% range and improving as the quarters progressed. And Q4 was looking like again a continuation of that progression until probably December, where we saw a pretty big drop because of Omicron. In most of the device of our device businesses, probably the only 2 that We didn't see that drop was heart failure that was probably up in the mid-20s in December versus 2019 and obviously Libre, Which was up probably like in the 70s percent versus 2019.

Speaker 2

So we did have an impact in these parts of the business. Again, it's Probably driven by Omicron impact of not only staffing, I'd say, but also even just patients basically postponing a little bit And not wanting to go to hospital. And I think that's continued a little bit here into January. I'd say geographically seen a little bit more of that impact In the U. S.

Speaker 2

Compared to other geographies, at least for us, Europe and Asia have held up a little bit better than the U. S. And then we've contemplated as best as we can what that recovery curve is going to look like. We'll see some pressure of that, I'd say, probably January, February going into March, we expect it to get better. And then Q2 will be better.

Speaker 2

And if we look at the second half of this year, we expect for these businesses to be more at their normal run rate. So I think I'd say that's what we're seeing and And that's kind of how we're forecasting the rest of the year. Actually, I was pretty pleased that some of the new product launches that we had during the quarter, question. We're always cautious about, okay, do we launch the product during in this environment? And they did pretty well, both in Europe and in the U.

Speaker 2

S. I think that speaks well about still the need for the products and the technologies and the innovation. So the consumer side of the consumer facing part of our business, I mentioned Libre, but you saw it in nutrition and EPD. They've done pretty well with the pandemic. They did pretty well in Q4.

Speaker 2

So didn't necessarily see the impact of Omicron to those businesses, like we didn't see Delta either. So we expect those businesses to be pretty resilient and the key driver there as I talk a little bit about Libre is just kind of innovation. On your first question regarding cadence, I mean part of it is this combination that I said recovering Device and core testing procedures that we see going into Q2 and into Q3 and Q4. Decision regarding our COVID testing, we'll see that kind of flow through and then we'll be able to update you. I think when we're here in April, We'll have a better sense of what Q2 is going to look like not only for the U.

Speaker 2

S. But also internationally. And as I said, Having that ability to then kind of update the forecast with that COVID number, we Yes, we'll let it flow through. So I think you also had a question about inflation. I mean that is Another area that we're working on and focused on and probably ask Bob to give you some color on that.

Speaker 3

Okay. Yes. And Robbie actually kind of Ask about currency and inflation. I'll cover currency first. I mean, we saw the U.

Speaker 3

S. Dollar kind of strengthened since the middle of last year, in particular over the last few months. And so as I said in my opening remarks, at current rates, that's about 2% headwind on the top line for the year. We're going to see that a greater impact in the Q1, around 3% and kind of in the second quarter and it'll get The impact will be a little bit less severe as we go kind of go through the course of the year into the back half of the year. In terms of inflation, Inflation and supply chain challenges are really kind of linked together as supply chains have not been able to catch up to the strong demand that's out there.

Speaker 3

And so we're seeing some impacts here, certainly not unique to us or our industry. And we're seeing those impacts across transportation costs, manufacturing inputs, commodities, etcetera. From a pricing standpoint, we have the flexibility to adjust price a bit in some areas of the business And we're doing so. That's really more in the consumer facing businesses like nutrition. In other areas of the business that Flexibility doesn't exist.

Speaker 3

So I'd say in aggregate kind of across those headwinds, we're seeing impacts on gross margin of roughly $500,000,000 and that's contemplated in our guidance. And I think as supply chains start to normalize over time, we would expect to see improving costs in some areas. For example, in Commodities for nutrition, those costs have kind of moved up and down historically over time. But currently our kind of outlook doesn't assume any significant changes kind of versus the current dynamics

Operator

question. Our next question comes from Zijay Kumar from Evercore ISI. Your line is open.

Speaker 6

Thanks for taking my question and good morning, Robert, I had two questions. Maybe my first one was on the new product side, Robert. You made some comments Perhaps a consumer kind of product at CES lingo. I'm just curious, how do you see the opportunity here, Brady? It's Slightly different perhaps from our perspective.

Speaker 6

But for Abbott, I mean, you guys have played in consumer markets. How big is this opportunity? Perhaps some sense for when U. S. Launch claiming could be?

Speaker 6

And should we expect more analytes, right? I think you guys had 4 analytes at CES, but I'm curious, Is there are there other products expected to come down the pipeline?

Speaker 2

Sure, Vijay. So we made a decision to put a stake in the ground here and start Talking about what we've always believed to be another opportunity, a sizable opportunity for Abbott I talked about this recently. Quite frankly, we talked about it several years ago also. And you referenced some of the analytes that we have been working on, ketones, lactate, alcohol, glucose for point. It is probably a much larger TAM in terms of people, Then you would kind of get on a person for example with diabetes today, where we're very clear whether you're a type 1 on pump or a Type 1 injector or a Type 2, like we know through the data we've covered here in terms of the usage patterns.

Speaker 2

So the use is pad a little bit different, but the sample size is significant. If you think about like a keto sensor And the opportunity to be able to provide real time feedback for somebody who's trying to manage their keto diet, I think there's a large amount of people, large consumer pool that whether it's more And we'll have to just think about how to market it a little bit differently and our go to market strategy will be a little bit But I'd say we've always seen this as a big opportunity and we funded it and we have a separate team that is Obviously, leveraging the platform, but they're managed differently, they have a completely different organizational structure. And they're just focused on developing not only the technical side of the analytes, but obviously doing all the market development work. So we're really, really in the early inning stages here, but I think the numbers can be pretty significant and pretty large. And why not over a good period of time, maybe it's even bigger than diabetes, once you line these up.

Speaker 2

The first to launch our first products outside of the United States towards the second half of this year. In the United States, we'll obviously be Having the conversations with the agency in terms of how that regulatory path is going to shape up, probably a little bit too early right now Talk about that, but we're very excited about this opportunity because we've seen this opportunity many, many years back And made the moves. On your question about other analytes, yes, I would say Part 1 or Phase 1, I would say is what I would call these more consumer facing more consumer driven opportunities, but we are looking at other analytes that would probably have, I would say more of a medical clinical application, whether it's in the hospital or for discharges, etcetera. So So there is opportunity there that we're also working on. So I think it's very large and we're just in the beginning right now in terms of market

Speaker 6

portion. That's helpful, Robert. And maybe my second question, balance sheet, I think you guys probably have over 40,000,000,000 Our capacity right now, conservatively. With valuations coming down, what kind of opportunities do you One of the things that always strikes me is Abbott is very large in diagnostics, Number 1. Number 2 in most of your end markets, if you look at diagnostics, liquid biopsy, cancer screening diagnostics is That's a massive opportunity, but I don't see Abbott having a stake in the ground in that area.

Speaker 6

Is that an area that would interest Abbott?

Speaker 2

Well, to answer that specifically, I'm not going to necessarily show all of my cards But I guess what I will say regarding the M and A question here is, yes, there seems to be some dislocation now And I think this could make sense. If there's anything out there that looks strategic for us and that makes Financial sense, then yes, we'll be we've got plenty of capacity as you said. We've generated a lot of strong And quite frankly, it's been a meaningful step up in that cash flow over the last year and a half or so. So yes, Strategically financial fits as I've always said. We're in a great position now to be able to look at that.

Speaker 2

Devices and diagnostics, I will say are the areas that We're looking at more carefully. Scott's team is always looking at everything, but he's got a More special lens here in devices and diagnostics. The areas that you referenced are areas that are in the list of things that we would be interested in looking at. Tuck in and medium sized deals probably are more likely, if again if those situations present themselves. But again, we're always looking at everything.

Speaker 2

So, I would say, yes, nothing has changed regarding what I've said about M and A. If It's strategic and it makes financial sense and we can deliver value for our shareholders. We are now in a great position as a result of All the efforts that we've had quite frankly on cash flow conversion and now with kind of COVID cash, that also helps.

Operator

Our next question comes from Josh Jennings from Cowen. Your line is open.

Speaker 7

Hi, good morning, gentlemen. Thanks for taking the questions. Rob, just first wanted to ask a question on 2022 guidance and Understand you didn't want to put a top end of the range there and cap the upside. Clearly, there's potential upside with increased COVID testing outside of that $2,500,000,000 revenue stream that you're expecting in the early part of the year. But just in the scenario where COVID testing does fall off and that guidance for the revenue from that franchise turns into reality.

Speaker 7

Can you just refresh us on some of the other levers you have that you can pull to drive EPS growth? I think last year In June, when COVID testing fell off, your team talked about share repurchase, accretive M and A, some cost cutting reductions, but just wanted to question. How should we be thinking about the diabetes franchise and Abbott's desire to kind of leverage the positioning there with other products, either insulin delivery devices or other portfolio ads as we move into 2022 and beyond. Thanks for taking the questions.

Speaker 2

Sure. On your first one, I mean, like I said, we derisked, we fully funded and we got the potential portion. For the COVID testing, if COVID testing in that scenario, which I think is highly unlikely kind of falls off. Then we'll have to obviously look at kind of the investments we're making and kind of make the adjustments that we have to make, As we start to move into 2023, I don't think that is the case. I think that COVID testing is going to be Still around.

Speaker 2

I think Omicron has catalyzed a pretty significant shift in global rapid testing and Screening. And the question here is just going to be how does it evolve Over the next kind of 9 months, 12 months here. So, but that being said, to your question on that scenario, you'd have to make adjustments. Question. As I've said, we would.

Speaker 2

But right now, I'm managing we're managing the enterprise as a whole and we're obviously got Profits that are coming from COVID that we're reinvesting into the business. If that turns out to not be the case this year, Then like I said, we're fully funded on our growth platforms. And then we'd have to kind of make adjustments or look at that investment level as we go into 2023. Buybacks is another opportunity that we've We've got a lot of flexibility here also. Last year we bought, I think it's about $2,000,000,000 in 2021.

Speaker 2

And I'd anticipate being active in the market again this year since we do have that capacity. So And your second question, I think was on diabetes, right? And Growth opportunities, is that could you just

Speaker 7

Sorry, absolutely. Just thinking about anything you can share just in terms of internal development programs outside of advancing Libre in diabetes and on the consumer channel on the sensing side, any other products within the diabetes device realm that you could add to the portfolio, or should we be thinking about the diabetes franchise, Sticking with the playbook that you have that's been so successful over the last number of years and has a long runway. Thanks.

Speaker 2

Got it. Got it. So listen, Yes. We're in the beginning here. There's still a lot of opportunities, still a lot of under penetration, whether it's internationally or Type 2s.

Speaker 2

As I've said, the key aspect here is to ensure your pipeline is relevant and is advancing. We've launched Libre3 in Europe and we'll be expanding that launch now globally. I expect to be able to bring Libre 3 here into the U. S. I won't I'll get into the specifics, but I figured you guys would eventually ask this.

Speaker 2

We have filed Libre 3 here in the U. S. As an ICGM portion of the FDA last year. I won't get into specifics about timing there, but it's the review process happens in the same agency that reviews diagnostic tests. So as you'd imagine, there's a lot of busy work going on We're feeling pretty good about where we stand.

Speaker 2

So I think that's a key component there is to expand the portfolio. I've talked about Libre 4, not necessarily what exactly is that, but we do have as an active program Connecting to insulin delivery systems is also part of that strategy. And we've got active programs with all pump suppliers and pen delivery systems also to be able to So I think we'll stay focused on making the best sensor, sticking to our strategy And continue to innovate with our sensor platform and then look at opportunities to use those sensors to not only expand into other platforms, but also connect to other devices.

Speaker 7

Great. Thanks a lot.

Operator

Thank you. Our next question comes from Joanne Wuensch from Citibank. Your line is open.

Speaker 8

Good morning and thank you for taking the questions. Question. And a big picture one and a specific one, big picture, one of the themes of your keynote address at CES was the marriage of Check-in MedTech. And I'm curious if you could highlight how you sort of take that lens in terms of your product pipeline. And then my specific question has to do with your structural heart franchise.

Speaker 8

Portico is out in the market, AMOLED is out in the market and I would portion. Love just a little bit of an update on how those products are doing. Thanks.

Speaker 2

Sure. So yes, I've talked about this convergence. And quite frankly, we've seen this convergence occurring probably when we are doing the St. Jude acquisition and integration. And we We started to set a lot of our portfolios to be able to connect to whether it's consumer electronics or clouds or other elements like that To ultimately be able to empower the consumer and just provide better solutions to ultimately Time now, as very pleasantly very pleasant to see, that start to look not only in the cardiovascular side, also On the Neuromodulation side, as I said in my opening comments on our virtual clinic, I think that's got an opportunity to change the business model of that So you've seen that in devices.

Speaker 2

We then started to see diagnostics, and you saw over that thinking as we develop Binax, we wanted to make sure that we were kind of integrating not just our expertise in developing an accurate test to be able to be able to detect COVID, but also integrated into an app where you can kind of have your pass and your phone, etcetera, and working with partners portion to be able to kind of do that. So I think you're seeing it across all of the portfolio. In our pharma business, we're using digital tools to be able to ensure that patients are taking their medications. So that's pretty, I'd say a strategic element going across all of our businesses and how we're thinking about it. So it's not I wouldn't say it's just one part of the portfolio, but I think it's a convergence that is happening and we want to be leaders in that convergence across all of our portfolio.

Speaker 2

Regarding your question on structural heart, so I think you mentioned Portico and AMULET. Listen, Amulet, we received approval in Q3 last year, moved quickly to launch. Portion. I'd say initial feedback has been very strong, especially in the areas of superior closure rates, The need to be able to leave the hospital without blood thinners. And also we've heard a lot of broader sizes to better fit more anatomies and give them more of that flexibility.

Speaker 2

So that's done very well. As part of the launch, we wanted to make sure that we had Good proctoring, good peer to peer proctoring. So obviously that became a little bit of a challenge in November December quarter. After Thanksgiving and into December. But I think despite all of that, I think we've done pretty well.

Speaker 2

I think we did about 500 procedures Last year, it mostly happened mostly in Q4. And if you look at what we did in December, that would put us at About 10% market share, which is which I think is pretty good. Obviously, we're not satisfied with that given what we know we can do and what we've done in Europe. But I think it's very portion is aligned to where we wanted to be regarding the end of the year and as we enter into 2022. So I think that's going very well.

Speaker 2

Portico, as I've said, this is an important area for structural heart. We know that There are 2 entrenched competitors in there. We think we've got a great technology also and we're going about it very systematically, very to build our position. We launched our Generation 2 product In Europe, our Navator product and again that's received great feedback also and there's pretty competitive to be able to expand our position here. So I feel good about our structural heart portfolio.

Speaker 2

I've talked about how this is Big opportunity for us. We've made the investments, and I think we're in a great position as we go into 2022.

Operator

Thank you. Our next question comes from Matt Taylor from UBS. Your line is open.

Speaker 9

Good morning. Thanks for taking the question. So I just had 2 margin questions. I wanted to ask the first one. I I guess I'll frame it as, if we take the $1.50 from Q1, that implies about $1.06 to $1.07 for the remaining quarter.

Speaker 9

So is that how we should view your base business earnings power? Or are you Still spending more through the year from some of the COVID testing profits or being conservative, would love just any additional color on the base business earnings power ex question.

Speaker 3

Yes, Matt, I'll take that. This is Bob. So we don't really think about earnings or at the bottom line base versus COVID. We manage the whole company. Obviously, the Q1 is benefiting from the majority of the COVID sales that we've got forecasted at this point in time, kind of our starting point, but we funded our growth throughout the rest of the quarter.

Speaker 3

So what you have is COVID testing, initial portion. COVID testing sales in that for Q1, but our investments throughout the entire year. And so as we update our COVID testing each quarter kind of as Robert talked about that will fall through Certainly at a higher level than our overall margin profile.

Speaker 2

I'll just add on to that, Matt. We absolutely expect There to be COVID testing after the Q1. The question is at what level. And as I said in the beginning to be able to kind of forecast a Full year out like that, given the magnitude of how this can shift, it's just prudent to do it a quarter at a time. So when we're here in April, we'll have a better sense of what Q2 is going to look like in terms of COVID testing and we'll be able to kind of update you Okay.

Speaker 6

Got you. Can I just one

Speaker 9

follow-up on So on gross margin, you mentioned that there's about $500,000,000 headwind from inflation supply chain? And so I guess if we add that back in for gross margins going forward longer term if things normalize. And if you could portion. Kind of see those levels in 2023 if things improve or just pluses and minuses on gross margins longer term?

Speaker 3

I think the add back that you're a little bit below that. But the way we think about gross margin every year is looking for ways to expand that. Every one of our businesses has dedicated teams focused on gross margin initiatives And you're seeing some of that benefit actually in our 2022 forecast helping to offset the impact portion of the inflation that we're seeing. We continue those programs that are not a 1 year program. We do them every year and we'll continue to do those into next year.

Speaker 3

The The other thing we're seeing is a benefit of kind of the business mix. So as medical devices and routine diagnostic testing recovers, That benefits our overall gross margin for the business. Obviously, Robert talked about a lot of the opportunity, some of the opportunities, it's even more That will have a positive impact overall on our gross margin profile.

Speaker 2

Okay. Let me wrap up here then. Thanks Bob. Listen, I'll finish by saying a little bit how I started. I acknowledge that there's a lot of uncertainties in the macro environment right now And the challenges that that creates in terms of forecasting for investors, at least in the short term, Pandemic, how long will it last, phases, transition to endemic, recovery curves of procedures.

Speaker 2

I get some of the Challenges of that forecast. But if I look at the market here at the start of the year and look at healthcare sectors, specifically medtech and diagnostics, Definitely been disproportionately hit by some of those uncertainties. And I think if you take a step back, I It's important to remind ourselves the healthcare still remains a very, very important need and a great long term growth area, Because I think none of the long term market fundamentals have changed during the pandemic. If anything, some of them have gotten even better and accelerated. So I think the Trends are still very favorable.

Speaker 2

Procedures and routine testing, they're going to come back, quarter. Whether it's a month, 2 months, etcetera, it's just difficult to predict with that perfect degree of But they'll come back. And if you look at the innovation pipelines across the entire industry, they've never been stronger. And within that context, I think Abbott's pretty uniquely positioned here. We're in great markets, franchise across all of these.

Speaker 2

So and to one of the questions, I think we're leading in the digital transformation, that's going to be more CentraCare, whether it's with bio wearables, whether it's connected devices, remote monitoring, etcetera. And then you layer that diversification that I talked about in my opening comments, which I think is very unique. It maximizes our growth opportunities and it does provide a natural hedge portion to some of these macro environment impacts that we're going to see from time to time. And that diversity is not just on the business mix, but Customers, payer types, obviously geographic footprint and a very strong and resilient supply chain. So you translate all that into real Strong, sustainable, strategic financial health, whether it's growing revenues, cash flows, dividends.

Speaker 2

We've got a rock solid balance sheet. I talked The opportunities that we have with it. So I think we're in a really good position strategically, financially and I'm Excited about all the growth opportunities that lie ahead of us. So with that, I'll wrap it up and I'll thank everybody for joining us today.

Speaker 1

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 call after 11 am Central Time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us.

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