Abbott Laboratories (ABT) Earnings Call Transcript & Summary

Good morning, and thank you for standing by. Welcome to Abbott's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] This call is being recorded by Abbott. With the exception of any participant's 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 express written permission. I would now like to introduce Mr. Mike Comilla, Vice President, Investor Relations.

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Phil Boudreau, Executive Vice President, Finance and Chief Financial Officer. Robert and Phil will provide opening remarks. Following their comments, we'll take your questions. Before we get started, some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995. 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, 2025. 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 related GAAP financial measures on a forward-looking basis for the non-GAAP financial measures for which it is providing guidance because the company is unable to predict with reasonable certainty and without unreasonable effort, the timing and impact of certain items, which could significantly impact Abbott's results in accordance with GAAP. Unless otherwise noted, our commentary on sales growth refers to comparable sales growth. Our definition of comparable sales growth can be found on Page 2 of our press release issued earlier today. And a reconciliation table containing the data needed to calculate comparable sales growth can be found on Pages 16 and 17. With that, I will now turn the call over to Robert.

Thanks, Mike. Today marks an important milestone in Abbott's history. Along with reporting our third quarter results, we announced our intention to separate our Nutrition business into an independent publicly traded company. This decision follows a comprehensive strategic review and reflects our strong belief that both Abbott and the Nutrition business can create greater value and achieve their maximum potential as independent organizations. Abbott entered the Nutrition business more than 60 years ago. Since that time, we built a strong foundation anchored by a talented global organization, iconic brands, and established market leadership positions across the pediatric and adult nutrition categories. The nutrition market has evolved over time with the pace of change accelerating significantly in recent years. What was once predominantly viewed as a health care market, almost exclusively shaped by health care professionals, has increasingly become a market shaped by changing consumer preferences, wellness trends, and retail execution. While this market evolution is not inherently positive or negative, it has fundamentally changed the environment in which we operate. So to best position our Nutrition business for maximum long-term success, we must evolve and adapt accordingly. At the same time, Abbott has strategically repositioned its portfolio over the past decade into attractive high-growth markets that require sustained investment to drive innovation and support long-term growth. So we believe both businesses will be better positioned for the future as independent organizations, each with a distinct identity, reflecting their different customer bases, growth profiles, investment requirements, and innovation cycles. And the separation will enable both companies to sharpen strategic and operational focus, direct resources more effectively, and enhance commercial and R&D effectiveness. As an independent company, Nutrition will be uniquely positioned to capitalize on the growing demand for healthy nutrition as consumers increasingly recognize the importance of metabolic health and the role healthy nutrition plays in disease prevention and overall wellness. The new Nutrition Company will be created from a position of strength. The team has done an exceptional job building a balanced growth model supported by sustainable mix of volume and price. The portfolio includes several iconic brands, including Similac, PediaSure, Ensure, Glucerna, and Pedialyte, which have market-leading positions across the pediatric and adult nutrition categories. With approximately $8.5 billion in annual sales, 16,000 employees, and 14 manufacturing sites, this will be the largest globally scaled pure-play company in the healthy nutrition market. Given its scale and financial profile, we would expect this new company to qualify for inclusion in the S&P 500. I'm pleased to share that Daniel Salvadori, Executive Vice President and Group President of Established Pharmaceuticals and Nutrition Products, will become Chief Executive Officer of the new Nutrition Company. Daniel joined Abbott in 2014 as Senior Vice President in our Established Pharmaceuticals business for Latin America and also served as Executive Vice President of Nutrition Products for 4 years before being appointed to his current position in 2021. Throughout his career at Abbott, Daniel has demonstrated outstanding strategic insight and operational excellence. His broad international experience and proven track record of delivering results as a business operator make him exceptionally well suited for this role, and I'm confident he will be a tremendous success. Daniel will be joined by an experienced leadership team with deep industry experience. And this is a battle-tested team that has demonstrated exceptional resilience and dedication while navigating a dynamic and evolving operating environment. Following the separation, Abbott will remain one of the largest, most diversified, and fastest-growing health care companies in the world. The Abbott portfolio will consist of even stronger mix of higher growth, higher-margin businesses powered by technology and innovation. As a result, we expect Abbott's sales growth to accelerate and margin profiles to expand. While the Abbott portfolio will evolve, maintaining balance across products, payers, and geographies will remain a key strength and source of resilience for the company. We built this portfolio to hold market-leading positions in 3 of the most attractive areas of health care: medtech, diagnostics, and established pharmaceuticals. The portfolio was also intentionally built to align with durable health care trends, including an aging population, increasing prevalence of chronic disease, and a growing demand for earlier diagnosis and more personalized treatment. With market-leading positions, an industry-leading pipeline, and a proven ability to consistently generate strong earnings growth and cash flow, Abbott is exceptionally well positioned to deliver sustainable growth and create long-term shareholder value in the years ahead. I cannot be more excited about this future. I have tremendous confidence in Abbott's future as an innovation-driven health care company, and I'm also confident in the opportunities that lie ahead for the new Nutrition Company. Most importantly, this creates 2 stronger organizations that will both continue to fulfill our mission of helping people live better lives. We look forward to sharing updates on our progress as we move through the separation process. I'll now review the third quarter results before I turn the call over to Phil. Sales grew 7% in the third quarter and earnings per share grew 9%, representing an acceleration in growth on both top and bottom lines compared to our results in the first half of the year. Turning to Diagnostics, where sales grew 6.5%, driven by performance in our core laboratory and cancer diagnostic businesses. Core Lab sales grew 5.5%, driven by strong performance in the U.S., Europe, Japan, and Latin America. On our earnings call in July, I highlighted that test volume data sourced directly from thousands of instruments located across the U.S. and around the world showed a pattern of strong and stable demand. We view this as a positive indicator of the underlying demand for health care more broadly. During the third quarter, our testing data continued to support that view with testing demand remaining healthy and at durable levels. In cancer diagnostics, sales growth of 14% was driven by Cologuard and contributions to growth from our Precision Oncology and international businesses. In September, we launched our first blood-based colorectal cancer screening test. As the only company to offer both stool-based and blood-based screening options, we are expanding the options available to health care providers and patients to help achieve the goal of getting more people screened. Turning to Nutrition. Sales grew 5%, reflecting broad-based growth across all 4 categories: U.S. pediatric, international pediatric, U.S. adult, and international adult. As I mentioned earlier, the team has done an exceptional job executing a more balanced growth strategy, achieving a more sustainable mix of volume and price-driven growth. In Pediatric Nutrition, sales grew 9%, led by growth of 11% in the U.S. As I noted last quarter, the strong performance in the U.S. includes the benefit from WIC contract wins secured earlier this year, which helped Abbott regain its market leadership position in both the WIC and non-WIC segments. In Adult Nutrition, sales increased 2%, driven by growth of 3.5% in the U.S. as retail consumption data continues to trend in a positive direction. We also continue to deliver strong growth on a sequential basis with worldwide nutrition sales increasing more than $100 million compared to the second quarter. And finally, we continue to make good progress advancing our innovation pipeline. During the quarter, we launched a new version of our Similac infant formula made with whole milk. This new product is the first and only commercially sterile ready-to-feed liquid infant formula made with whole milk available in the United States. Turning to EPD, where sales increased 8.5% in the quarter. Our broad portfolio of prescription and over-the-counter medicines tailored to address local health care needs continues to drive strong growth across emerging markets. Growth in the quarter was broad-based across geographies and therapeutic areas, and this included double-digit growth in several countries across Asia, Latin America, and the Middle East, highlighting the strong and durable demand that has long been a hallmark of this business. And I'll wrap up with Medical Devices, where sales grew 8%. Growth was well balanced across the portfolio, led by double-digit growth in electrophysiology and rhythm management. In Electrophysiology, our third quarter results reflect the early beginning of our growth acceleration phase. Growth in the quarter was mid-teens or high teens when excluding LAA. In the U.S., growth was in the high teens and exceeded 20%, excluding LAA. This performance was driven by increasing adoption of our new Volt PFA catheter with momentum accelerating in September following the transition to a full U.S. market release in mid-August. International growth also accelerated as we continue to capture market share in Europe, driven by increasing uptake of our new PFA catheters and growth in other categories across our broad portfolio. In September, we received FDA approval earlier than expected for our TactiFlex Duo catheter. This catheter enables physicians to seamlessly switch between using RF and PFA energy during a procedure. Given physicians' familiarity with the TactiFlex platform, we expect to execute a broad U.S. launch starting in the fourth quarter. In the third quarter, we also received CE Mark for our new Amulet 360 left atrial appendage device designed to help reduce the risk of stroke in patients with AFib. We look forward to bringing this new technology to the U.S. In Rhythm Management, sales grew 10%, driven by increased adoption of Aveir across both single and dual chamber segments of the pacemaker market. This expanding use of Aveir is occurring in both the U.S. and international markets. And in diabetes care, continuous glucose monitoring sales grew 8% in the quarter. In August, we received FDA approval for Libre Duo, the world's first dual glucose ketone biowearable sensor. This marks the first time that people with diabetes will be able to monitor ketones without the need for traditional blood or urine tests, and we expect to launch this new sensor in the U.S. in December. So in summary, we delivered an acceleration in growth on both top and bottom lines. Innovation continues to be a key differentiator for Abbott, highlighted by multiple new product approvals and launches that further strengthen our ability to deliver sustainable growth in the years ahead, and we took an important strategic step towards shaping our future through the planned creation of a new market-leading nutrition company. I'll now turn over the call to Phil.

Thanks, Robert. Let me begin my remarks with an overview of some of the key aspects of our planning process for the separation. The new Nutrition Company will become a publicly traded company through a planned tax-free distribution to Abbott shareholders. Upon completion of the separation, Abbott shareholders will own shares of both Abbott and the new Nutrition Company, enabling our shareholders to participate in the value creation opportunities of both businesses. The final share distribution ratio will be communicated prior to the separation, which we anticipate completing by the end of next year, subject to the required approvals. We expect to incur separation-related costs as we progress through the separation process. These costs will be treated as specified items and excluded from adjusted earnings. As a result, we do not expect the separation to have an impact on what we plan to provide in January. As we prepare for the separation, we intend to establish capital structures that ensure both companies have a strong financial foundation. This includes ensuring adequate capital to support long-term growth objectives and capital allocation priorities while maintaining strong investment-grade credit ratings for both companies. As part of that process, we are planning for the new company to raise debt with a portion of the proceeds to be distributed to Abbott. The amount of debt to be raised and the amount to be distributed to Abbott will be determined at a later date. Finally, we expect that both Abbott and the new Nutrition Company will pay a dividend that, when combined will equal Abbott's dividend at the time of the separation. Following the separation, we expect Abbott's financial profile to reflect an acceleration in the sales growth and increased profitability. Excluding the current profile of the Nutrition business from the current profile of the Abbott portfolio, we would expect sales growth to accelerate by 50 to 100 basis points, gross margin as a percent of sales to increase by more than 200 basis points, and an operating margin as a percent of sales to increase by approximately 100 basis points. Now turning to our third quarter results. Sales increased 7% on a comparable basis and adjusted earnings per share of $1.42 was in line with our guidance and the consensus estimate. Foreign exchange had an unfavorable year-over-year impact of 0.4% on third quarter sales, which was a slight improvement compared to our expectations at the time of our earnings call in July. Regarding other aspects of the P&L, the adjusted gross margin profile was 57.2% of sales, representing an increase of 140 basis points compared to the prior year. The improvement in gross margin was broad-based, reflecting favorable business mix within the legacy Abbott portfolio and from the addition of Exact Sciences, as well as the continued operational improvements and disciplined execution of our margin expansion initiatives. Adjusted R&D was 6.9% of sales and adjusted SG&A was 26.9% of sales. Our operating margin of 23.4% expanded by 40 basis points compared to the prior year. And based on current rates, we expect exchange to have a negative impact of approximately 1% on fourth quarter sales. For the fourth quarter, we forecast adjusted earnings per share of $1.62 to $1.67. With that, we'll now open the call for questions.

[Operator Instructions] And our first question will come from Robert Marcus from JPMorgan.

I'm sure others will ask on the business and the guide. But Robert, given the news this morning on Nutrition, I want to start with that to make sure we address it. Maybe you could run through the strategic rationale, why now? Why spin versus sell? And any other important points you want to highlight for us?

Sure, Robbie. I actually think that's the right call to start off -- the right question to start off with, to be quite honestly. It's a pretty big announcement for us, and we've gone through a lot of work to be able to make this announcement today. I've seen a lot of notes be written about, kind of, the portfolio, and all of those notes are from sum-of-the-parts and, kind of, growth rates and impact to growth rates and margin profiles. And I think Phil mentioned some of those. And those are all, I would say, good outputs of a decision like this. But I think it really starts with a very simple as I laid it out, which is there's a huge opportunity that I think is building in this market in this segment. And we're seeing a shift towards a much more healthy nutrition behavior from consumers, not just in this country but around the world. You're seeing a lot of traditional food companies try to reposition their portfolios, moving away from ultra-processed to try and look at their portfolios and ultimately try and build portfolios that try to mimic actually the portfolio that we actually have today. So, so, I just think that strategically over the next decade, this is -- there's going to be a lot of segments in this nutrition business that we've built that are going to be very differentiated and, kind of, high growth. And if you look at Nutrition's portfolio, its position today, the capabilities that it has, it is destined to be a market leader and a market shaper of that entire segment that's going to have this accelerating growth here. But they are going to need to adapt. As I said in my comment, they are going to need to evolve. And ultimately, they are going to need to invest, invest in, kind of, sales and marketing, even maybe look at tuck-in M&A from their perspective to accelerate their growth rates and all of that. And I just -- we just came to the conclusion that this was too exciting of an opportunity, and we just believe that all the things that they would need to do, they'd probably be able to do it faster and more efficiently and effectively as an independent company. So, it really just comes down to that. Yes, there's the -- I would say, the ancillary effects of those decisions, Robbie. I think you've written -- done a good analysis on that in terms of what that does to our growth rates and all of that. But I think it really comes down to really the driver of the decision is this is going to be an exciting space. And as a result, we think that the Nutrition business is going to be able to capitalize better on that by being an independent company. From a financial asset perspective, I think this is going to be a very -- as we look at the spin, I think this is going to be a very, very unique asset. If you benchmark it versus its category peers, and not necessarily versus, kind of, the med tech peers that they're currently part of right now. It will have a very -- it will be a very differentiated asset, whether you think about growth, mix, the scientific capabilities it has, its growth prospects. It's going to be, as I said, the only scaled truly global scale pure play in this, kind of, healthy nutrition. So I think this is going to be a very, very distinct asset. To your question on why now? Listen, we've got a history of shaping the company. I think that's one of the hallmarks of Abbott, and that's, I think, why we're still relevant today after 138 years is that we will look at shaping the portfolio to align to where we see the market trending and where we see clinical needs and problems to be solved occurring. But as you do that, you also need to be thinking about sequencing. And I think sequencing is a key element as you think about shaping the portfolio. And there are very different elements of shaping. But for me, from an operational standpoint, I just think you need to be mindful of, kind of, organizational bandwidth and ability for the organization here to absorb the moves. So we have an order of events in mind of how we're thinking about things. I think we identified, for example, if you go back a couple of years like we identified precision diagnostics as the next area that we wanted to be a part of. So we announced our acquisition of Exact Sciences last year. The integration is going great. Actually, I think we've done a lot of heavy lifting in these first 6 months have got a lot done. I'm sure we'll talk about that, too. So I just think that now is the right time to start that process of creating the new company. It's coming from a position of strength, as I said in my comment, I think I read a story that just came out -- a headline that just came out on Barron's, who got it totally wrong. I'm just going to say it. I mean it's coming out of a position of strength. And we've got a very sustainable growth model. If you look at the volume growth that Nutrition had this quarter and what we're projecting to have in the next few quarters, it is significantly higher than what its peer set is given the portfolio that we've built and the segments that we're in. So the business has returned to growth. The pipeline is very healthy. We're bringing innovations to the market. There's going to be a lot of interesting innovation over the next, kind of, 12 months here, got strong brands, experienced, and very capable team. As I said in my comment, I specifically chose the term battle tested because that's, kind of, what it felt like over the last 4, 5 years. And if I had to pick a team to go to battle with in this nutrition space, I'd pick that team. I think they've navigated very well, everything that they've done and all the environment that they've operated in. So I think this is just a unique opportunity for us and for the Nutrition business. And I think you had a question on spin versus sell. Yes, I mean, we just thought that this was -- after we went through the analysis, after you make a decision that it's probably going to operate better as an independent company, what's the right mechanism there to be able to position it to be a leading company and ultimately to drive shareholder value. And we just concluded that the spin-off here was absolutely the right approach. A sale of a business like this, as I said, we've been in this business since the 1960s. So if you think about the sale, the sale is going to come with an obvious tax implication there. And then a time line that is not necessarily within -- entirely within our control here. So I think these 2 factors might be a little bit prohibitive here for anybody that's got any interest. So we have no interest in selling the business, have no intention to selling, not even looking at selling it and just think that spin-off is the better value creation for shareholders here. We've done a couple -- obviously, we've done a couple of spin-offs in our history. Those have gone very well. Obviously, different circumstances, different times, different management teams. And -- but I think one of the things that is clear to us in these processes is I think one of the big indicatives indications here of a successful spin. I think a lot is attributed, I think, to a very highly group of Abbott people that become founders, so to say, of the new company, and they instill a lot of, kind of, the Abbott, kind of, culture and the Abbott way of doing things into that business. And I think that helps set a strong foundation here. So, like I said, I think this is a unique opportunity, growing demand for healthy nutrition. This will be a very differentiated asset here, and that's why I thought the spin was the better move here. So, and obviously, we're going to be working over the next, kind of, 12 months here to be able to get ready for that. And as we do with these, I think, Robbie, is we're obviously going to prepare to set up the Nutrition Company for success. But it's also an opportunity for us to relook also at existing Abbott and looking at our cost profiles and things like that, it's going to be a great opportunity for us to relook at everything from that perspective. So I think I'm excited about this. I think this is -- was a good process. I think we came to the right long-term strategic decision here. And now it's all about execution.

Our next question will come from Larry Biegelsen from Wells Fargo.

Robert, congrats on the Nutrition spin. Just confirm, please, that the net liability will remain with Abbott. That seems logical from what we've seen from other spins. And secondly, can you please talk about the drivers of the revenue guidance reduction this year? It looks like it implies about 8% growth in Q4. And what are the implications for 2027?

Sure. I figured this question would come up, Larry. I thought it will come up a little bit down in the list here. But well, I mean, I think like you said, as it pertains to the announcement that we just made, how to deal with litigation matters is it's a common topic when it comes to business separations. We're not the first company that's had to deal with this. Like you said, I don't think -- actually pretty clear that we don't need to fully resolve the litigation matters. It's not a prerequisite for completing the separation. I'd say both Abbott and the new company are going to be well capitalized, well capitalized to pursue their respective growth opportunities, well capitalized to execute their respective capital allocation priorities that they might have and also well capitalized to continue to defend the legal positions here. So I'll provide more details of that as we progress in terms of exactly where the liability will sit. But for me, both companies are going to be super well capitalized to be able to deal with that. At the same time, I think we continue to focus on achieving what we want to be a logical and sensible, kind of, resolution. You saw we took a meaningful step back in August when we settled 2,000 claimants. But that settlement in no way reflects any change to the position that I've made here about these products, which is continue to stand behind their efficacy and safety. They remain essential component to neonatal care. They are a standard of care. I think if these products weren't available, I think you would see a little bit of a public health crisis there. And I think that view is supported by regulators and medical societies, including the FDA, NIH, CDC, and the American Academy of Pediatrics. So I think the litigation environment now is shifting a little bit, I would say, a little bit to our favor. We prevailed a lot in federal MDL cases, and there's going to be important decisions in both federal and state courts that have helped increase our position. So we'll provide updates as we go through the process in terms of a little bit more specificity and details. But all I can say is not a prerequisite to resolve it before the separation, and both companies will be well capitalized to be able to deal with this. So and then, sorry, what was your second question, Larry?

Yes, sorry. The revenue guidance reduction, I think, to 6% this year implies about 8% for Q4. What was the driver or drivers of the revenue reduction and implications for next year?

Sure, sure. Yes, listen, our Q3 growth was in line with the expectation of 7%. We had the normal puts and takes, Larry, that you have when it comes to managing a large portfolio like us. We had 2 businesses that beat expectations, one business that met expectations and then one business that missed expectations. So the reduction in Q4 to -- for the full year around 6%, like you said, implies just north of 8%, which is at least accelerating versus where we were in Q3. I mean it's really driven by 2 businesses here. And I would characterize these as they're not, kind of, permanent changes to the growth rate. It's just adjusting based on, kind of, what we're seeing right now, which is EP and diabetes. So let me unpack that a little bit for you. In EP, we're facing some short-term headwind from the dynamics related to the LAA market. It's become an increasingly headwind to our EP growth, not only due to the market challenges that I think a competitor has discussed pretty ample. But I'd say for us, so we saw that maybe with a quarter or 2 delayed versus where they were seeing it. And maybe that's just because of our size and market share position. But what was interesting is as soon as we got CE Mark for the new LAA device, there was almost like an immediate slowdown in orders here in the U.S. as I think accounts are waiting for the new product. So that's probably a little bit different for us. And so when I got that, I was like really -- and they were able to show me clearly, kind of, trends that we were seeing even with the slowdown and the impact of that CE Mark. So I expect that dynamic to be there in Q4. And I think that's going to be the last quarter where we're going to see this dynamic of accelerating, kind of, ablation business being offset a little bit by this headwind here. I think as we bring in 360 to the market, I think we'll start to, kind of, reignite that growth and capture share, at least that's my goal. But listen, despite the headwind, as I said in the prepared comments, I think the quarter we acted with a lot of great momentum, continue to capture share in Europe. Europe growth was up 25% and you have both combination -- you have both platforms there, Volt and TactiFlex Duo. We're going to launch Volt in Japan sometime in Q4. That's going to turn Japan from a headwind to a tailwind for us. Japan, kind of, followed very much a U.S. type model where there was very rapid adoption of PFA. So we're excited about coming to the market in the fourth quarter in Japan. And I think Volt transitioned from limited market release to full market release in the U.S. in mid-August. So Q4, you'll have this, kind of, full quarter of the impact over there. And the product is doing very well. And I think that -- I think people might not have understood, kind of, the dynamics of what a limited market release is and then how you transition to full market release, and I explained why we do that for all of our products. So TactiFlex Duo got approval in September. That came a little bit earlier than I expected. And as I said in the comments, this is one where the TactiFlex chassis, like I'll say, is widely used already. So we'll probably do a very short limited market release here very short and then go to full launch already in Q4. So I think that's going to provide a lot of momentum here. So we've got a lot of catalysts lined up for our EP business. So I think the impact of that is about 5 points of growth versus where we were previously around 25%. I think we'll be around 20% in Q4. But I still believe even with that number, we're going to be taking market share. So that's one of the drivers. The other driver is diabetes. I think in the July call, Larry, I talked about that the CGM market had not seen a significant new reimbursement expansion for quite some time, and that led us to revise our diabetes growth outlook to high-single. If I look into Q4 right now and probably for the next few quarters, and I expect that growth rate to be in, kind of, that low to mid-single range. And that really is -- that change really reflects, I think, 2 things. One of them is a little bit of a harder challenge in penetrating the type 2 population in absence of the reimbursement expansion. So that's probably one, kind of, key driver. And like I said, that's going to be when we see the reimbursement expansion occur at CMS, like I said, I think we'll see a very strong, kind of, reimbursement growth. So that's one element there, Larry. And I think the other element that we're seeing is a little bit more pricing pressure in the international markets. And as you might know, we have significant market share in the international markets. If you look at all the major countries, we'll range between 50% to 70% market share. And we've always expected there to be some pricing pressure, especially with the growth of the category and the excitement. And we've been -- internationally, I think you see a lot more competition. And we've been very good. I think the team has done an excellent job through marketing, through clinical, through all the superiority of the product over the last couple of years to be able to defend that. And so I expect it to be a little bit more price pressure internationally a little bit earlier. So I think the team did a really good job there. But I think our pricing actions here that we're going to have to take internationally are going to, kind of, mute a little bit of the volume growth that we're seeing. And I think it will be a strategic mistake for us to lose market share based on price in these international markets. And we're not having to match the pricing, Larry, but I think we're having to adjust a little bit here as we go through this. And I think that's what I'm forecasting here over the next, kind of, few quarters is we'll make some pricing adjustments. As we do those, we're going to secure longer-term contracts and then also have language there regarding, kind of, expansions of patient populations also. So I think you have this dynamic here for a couple of quarters in our diabetes business so that we can make sure that we can defend our market share position. And then I think what you'll see then is, kind of, similar to the, kind of, decisions we made in other parts of the portfolio where you have a little bit of an impact for a couple of quarters and then you, kind of, reignite. I don't think this is at all any issue with the market. I've been pretty adamant about the ability still for there to be lots of market penetration. But I mean, we're not going to have our heads in the sand here and just think that you've got this great market and not expect there to be some price competition. The good thing for us, though, I would say, is because of the scale that we built and because we've been planning for this and being ready for this, we're going to be able to offset, kind of, the margin impact of that through our COGS programs and the things that we've been doing in our manufacturing setup. So I think that's really the driver. But I would say, if you look at -- we've got plenty of growth opportunities also, Larry. So when I, kind of, set that target of, kind of, low to mid, if I look at what we've got ahead of us, Libre Duo is going to launch. We really haven't launched that product yet, and I think that's going to be a nice growth driver for us next year. We're going to have a benefit here in the U.S. from a pretty significant payer formulary coverage that flipped in our favor, and that's going to go into effect January 1. So there's a lot of growth opportunities that we've got in our diabetes business. Would I be surprised that we would do much better than that next year? It would not surprise me at all that we would do better. But at this point, I'd say we got to make sure we get the pricing aspect right. And then we'll -- as we go through the year, we'll be factoring in some of these growth drivers and the implications that they have. So if you think about 2027, then I think as you're looking at, okay, how does that translate into 2027, I expect to see acceleration in our total company growth rate. And there's a lot of reasons why we would expect that. But I would say we're probably going to take a little bit more of a conservative approach here in terms of how we've guided historically, at least on the top line. We've maintained, I'd say, a pretty impressive track record for delivering on our EPS targets. I think if you go back for the last 6 years, we've met or beat our EPS targets every single quarter. And if you look at the annual growth rate of those -- of what we've been doing to our EPS, it's been around 9% EPS growth. So I think we've been really good and strong over there. As it relates to our top line, I think we've been very good, but I'd say the track record here in the last couple of quarters, especially during this year, has been a little bit more inconsistent, let's call it like that, and then we've fallen short from some of the expectations. So I think for 2027, I think we'll set our guidance that's going to create opportunity for us to move up from there in January. I'm not going to give an official guidance here before our January's call, but high level, I'd say forecasting sales to be as we come out of the gate, pretty similar to this year. And I think that just probably feels like the right place to start. And Larry, I say that while I acknowledge that we had a lot of new product launches this year, there's a lot of carryover from the products we launched this year into next year. There's a lot of new products we're launching in 2027. I get that there's probably some comps also, especially in the first half. So I get all that. And all of that would obviously say, hey, you're probably going to accelerate your 2027 growth versus your 2026. I strongly feel that that's going to be the case. But I said to start off, I think we'll take a little bit more of a different approach than what we've done in the past, and then we'll be able to, kind of, go up and move up from there. That being said, we're still going to have great opportunity for gross margin and gross margin expansion. We're still going to have earnings growth. We're still going to be investing in our near and long-term product pipelines. We're still going to be able to generate real strong cash flows. We'll grow our dividend, all the stuff that you would expect from Abbott, we're going to be doing and all of that. But I think that's probably the prudent way to start the year, and that's going to give us the opportunity to, kind of, move up through the -- as the year progresses.

Our next question will come from Patrick Wood from UBS.

Really appreciate it. I'd love to start on the pipeline and really just dig into that because obviously, you've got conduction system pacing midterm, Amulet 360, probably $200 billion of biologic drugs going through LOE. There's obviously a lot midterm that's going on. And so I guess my question is in 2 parts. A, how do you feel about the forward pipeline today compared to the forward pipeline in the past? How would you rate it? And b, as you're thinking about it, not asking me to pick your favorite children, but what do you feel like either gets missed by the market or less attention or something that's really on your radar and very personally a big sort of focus area for you?

Sure. I mean I love all of our innovations, Pat. I don't think you're going to get me to go there. But I would say, listen, I think the market recognizes the pipeline that Abbott's built. I don't think that there is a misunderstanding of what we're assembling over here. So we can talk about those, but I don't think there's like some misunderstanding. I think it's clearly visible to investors that we've got multiple shots we're developing across all of our businesses. Yes, and some of them will do better than others, but I think all of them will have great contributions to our growth rate. And yes, all we need is 1 or 2 to, kind of, completely blow it out, and it, kind of, changes the entire trajectory. But we're building a pipeline of products organically here that we're anticipating what our customers need, and we're making those investments. If you look at the R&D spend for Abbott pre-COVID, I mean, we were averaging around $1.7 billion, $1.8 billion. We're crossing $3 billion this year, and we'll be increasing that into next year, which was, kind of, to my comment in 2027. We're going to continue to make our investments. We're going to continue to expand margins, and we can do all that because of how the portfolio is positioned into these very high growth, high margin and quite frankly, a lot of clinical problems to solve. So I think you mentioned a couple of them there. I've talked about some of them. I'm excited about the -- you mentioned right off the get-go, the Aveir CSP that's going into trial right now, the conduction system pacing leadless product. I'm excited about that because our goal is to completely change how pacemakers have been used in the past. And I think our latest technology shows that, that is possible. And we're looking about really building a, kind of, sustained growth rate. Many people didn't think that CRM was a growth business. We're showing that with good innovation, good insights, good relationships with KOLs, we can drive that. I'm excited about the mitral replacement valve. I spent some time close to that program, probably a little bit more closer than others, and had opportunity to interact with the KOLs. And I know because I've seen how these things play out, I can read people in terms of how they talk about innovations. And you can tell sometimes when innovation is good and it will compete well. And you can tell when a KOL tells you that this is really going to be a game changer, and it's going to change, kind of, the standard. And I think our Cephea program is going to do that. We've got a balloon-expandable TAVR valve going in. We've got IVL programs on the MedTech. We've got neuromodulation, kind of, investments that we're making also. We're making investments in our Libre platform, not just on a new diabetes sensor, but also looking at how to use the platform that we've built, the manufacturing, the technology platform to expand into other analytes, and we're going to go into trial with a lactate sensor. But I can tell you, there's at least 5 or 6 that the team is really excited that we're funding and that we're working on. Will all of them hit? Probably not. But if 2 or 3 hit, it will be incredible, I think, to be able to, kind of, leverage that. So I think you mentioned the biosimilars in our EPD business. I mean, yes, there's a significant amount of LOE that's happening in the biologics space. And a lot of these products aren't available in these emerging markets by decisions from the originators. So this is going to be a huge opportunity for us to leverage the regulatory, the government, the physician, the distribution relations that we have to bring these products on. And you've got this business that's been growing at least for the last 5 years between 7.5% and 8% pretty consistently every single quarter. I think that, that is going to be very exciting also. So and then on top of that, we're going to get into a bunch of new tests, new personalized diagnostic tests with our cancer diagnostic business. Extremely, we're going to be reporting data on our MRD test at ESMO. I'm extremely excited about that test. And I think it's going to provide us an opportunity also to start to be a player or at least to compete effectively in that segment of the market. So I'm sure I'm missing a bunch out already, too, but I'd say there is a deliberate effort on behalf of the entire management team here to make sure that as we find sometimes challenges and we have to look at our operational expenses that R&D is really never an area that we're going to touch because we feel that our productivity in that, even with a 7% profile, we're getting a lot of productivity out of the pipeline. So I think that, that is ultimately the lifeline that it's going to be the growth driver for us. I'm sure that somebody in my team has got a map. I'm sure that my IR team has a map that lists out all the products between 28, 29, 30, 31, and those are all projects that we're constantly looking at, looking at ways to accelerate them, looking at ways to make them better. So we feel very good about our pipeline. At the same time, we don't suffer from the syndrome of not invented here. We never have. Do I prefer to have more of my organic innovation being organic? I do. But we've got plenty of capacity also to be able to, kind of, add to the portfolio. And if we see opportunities to do that, we'll do that. I've talked about probably going forward, at least for the foreseeable future here in the short term, there'll probably be more tuck-in deals, but we can do all that. We can have organic innovation, and we can also look externally. And I think external partners look at Abbott as like, okay, this is a company that can actually make these innovations really impactful and global in the market. So I think we have a good position there, too. So pipeline is super healthy. And if my R&D team is listening to this, they'll probably say, yes, but we could probably use more. They probably have a bunch of projects under the line, and that's good, too. But I think we're investing in all the right areas to be able to sustain our growth.

Our next question will come from Matt Taylor from Jefferies.

I was hoping we could spend a minute or 2 on diagnostics and focus on cancer diagnostics and the trends there. It looks like you did a little bit better this quarter, but I know you're hoping for a step-up into the mid-teens. Could you just touch on the dynamics with Cologuard, the rest of the business and maybe give us some thoughts on Freenome?