Abbott Laboratories (ABT) Q3 2020 Earnings Report, Transcript and Summary

Good morning, and thank you for standing by. Welcome to Abbott's Third Quarter 2020 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 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, President 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 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 of 1995, including the expected financial results for 2020. Abbott cautions that these forward-looking statements are subject to risks and uncertainties, including the impact of the COVID-19 pandemic on Abbott's operations and financial results 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, 2019, and in Item 1A Risk Factors in our quarterly report on Form 10-Q for the quarter ended March 31, 2020. 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. Please note that financial information provided on the call today for sales, EPS and line items of the P&L will be for continuing operations only. 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. Unless otherwise noted, our commentary on sales refers to organic sales growth, which excludes the impact of foreign exchange. 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 organic sales growth of 10.5% and ongoing earnings per share of $0.98, which reflects high-teens growth versus the prior year. Based on our performance and momentum through the first 9 months, along with our expectations for the remainder of the year, we increased our earnings per share guidance to at least $3.55 for the full year. This speaks to the strength and resilience of our diversified business model as well as our ability to innovate and deliver in this challenging environment. While the pandemic has created many new business dynamics, we've continued to invest in our growth platforms. And our pipeline continues to be highly productive, resulting in several new product launches and approvals this past quarter, including U.S. FDA Emergency Use Authorization for our BinaxNOW rapid antigen test, which can detect COVID-19 infection in just 15 minutes with no instrument required; U.S. launch of FreeStyle Libre 2, which sets a new standard of accuracy and performance in the market; CE Mark of Libre 3, which automatically delivers real-time glucose readings every minute in the world's smallest and thinnest wearable sensor; CE Mark of Libre Sense Glucose Sport Biosensor, our initial step to expand use of the Libre platform beyond diabetes; and finally, CE Mark of MitraClip G4, the latest generation of our market-leading, minimally invasive mitral heart valve repair device. I'll now summarize our third quarter results in more detail before turning the call over to Bob. And I'll start with Nutrition, where sales increased 4% in the quarter. Growth was led by Ensure, our market-leading Adult Nutrition brand, which contains several ingredients to support a healthy immune system. We're seeing strong demand in both U.S. and internationally, which led to global Adult Nutrition growth of 12.5% in the third quarter. In Pediatric Nutrition, sales growth in the U.S. was led by our market-leading Pedialyte rehydration brand, which was driven by market conditions and portfolio expansion. Internationally, growth in Southeast Asia was offset by continued challenging conditions in Greater China. Moving to Established Pharmaceuticals or EPD, where sales declined 3%. During the quarter, we saw challenging market conditions in several countries due to the COVID pandemic. Whereas the virus had its biggest impact in developed countries during the second quarter, we saw it hit emerging markets more significantly this past quarter, which lowered market demand. Encouragingly, as we exited the quarter, we started to see signs of market recovery in several of those countries, and we expect we'll see a continued recovery curve going forward. I'll turn now to Medical Devices, which grew 2.5% in the quarter. We continue to see steady improvements in demand and procedure trends across our portfolio, which resulted in 5 of our 7 businesses within Medical Devices achieving positive sales growth in the quarter, including Electrophysiology, Heart Failure, Structural Heart, Neuromodulation and Diabetes Care. Growth in the quarter was led by Diabetes Care, where sales grew 25%, including more than 35% growth of FreeStyle Libre, our market-leading continuous glucose monitoring system. As I mentioned earlier, during the third quarter, we launched Libre 2 in the U.S., which sets a new standard in the market with best-in-class accuracy and alarm performance as well as 40% longer wear time compared to competitors. Although still early in the launch, customer feedback has been overwhelmingly positive. We also obtained CE Mark to Libre 3, which integrates Libre's leading accuracy and performance into the world's smallest, thinnest disposable sensor, the size of just 2 stacked pennies at the same affordable price as currently available versions of Libre. And in Europe, we also launched Libre Sense Glucose Sport, which is our initial step in a very intentional approach to pursue mass-market biosensor opportunities beyond diabetes. Libre Sense allows athletes to monitor their glucose levels in order to learn how and when to best fuel with food and supplements to avoid fatigue and achieve peak performance. I'll wrap up with our Diagnostics business, where sales grew nearly 40% in the quarter. As I mentioned during our last earnings call, our teams have worked tirelessly since the beginning of the pandemic to bring to market multiple COVID-19 tests across our diagnostic testing platforms. During the third quarter, we launched a new rapid antigen test called BinaxNOW, which is a disposable test about the size of the credit card that can determine if someone is infected with the virus within 15 minutes without the use of an instrument. Given the mass-market need for testing, we knew that developing and launching this test was only half the equation, which is why we simultaneously built 2 new manufacturing facilities in the U.S. to help meet the public health need of testing as many people as possible, as often as possible, to help reduce the risk in the environment and slow the spread of the virus. To date, we've sold more than 100 million COVID tests across our diagnostic platforms. And we continue to pursue opportunities to further increase our manufacturing capacity to help meet the significant demand for testing around the world. So in summary, despite the challenging environment, we achieved double-digit organic sales growth and high teens EPS growth in the quarter. Our pipeline continues to be highly productive, resulting in several important new product launches and approvals during the quarter. We continue to lead in the area of diagnostic testing for COVID-19, which has added a significant new layer of growth for our business and accelerated our distributed testing strategy. And we've increased our full year EPS guidance, which highlights the strength and resilience of our diversified business model. I'll now 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 results. Sales for the third quarter increased 10.6%, which was led by strong performance in Nutrition and Diabetes Care, sequential growth improvements in Cardiovascular and Neuromodulation devices, along with global COVID-testing-related sales of approximately $880 million in the quarter. Foreign exchange had an unfavorable impact of 1% on sales, which was somewhat favorable compared to expectations had exchange rates held steady since the time of our earnings call in July. Reported sales increased 9.6% in the quarter. Regarding other aspects of the P&L, the adjusted gross margin ratio was 57.4% of sales, R&D investment was 6.3% of sales and SG&A expense was 26.7% of sales. Now turning to our outlook for the full year. As Robert mentioned, we're increasing our guidance for full year adjusted earnings per share to at least $3.55, which includes our expectation for strong double-digit sales and earnings growth in the fourth quarter. Based on current rates, we would expect exchange to have a negative impact of approximately 1.5% on our reported sales. We forecast full year net interest expense of around $500 million and continue to forecast a full year adjusted tax rate of 15.6%. With that, we'll now open the call for questions.

[Operator Instructions] Our first question comes from David Lewis from Morgan Stanley.

Just a couple of related questions. Robert, I wanted to maybe think about next year a little bit given we're closing out this year. And obviously, investors are in the process of trying to figure out '21 estimates for a whole bunch of companies and whether they're achievable. In your case, at least for us, they clearly look beatable. But I wonder if on a high level you could share with us how you're thinking about growth, earnings and, frankly, the opportunities for reinvestment for Abbott in '21? And then I have a quick follow-up.

Sure. Well, I think it's -- we had a very strong quarter, which gave us confidence here to be able to raise the bottom end of our forecast this year. And obviously, that momentum -- that strong momentum is going to -- will carry into 2021. It's a little premature here, David, to kind of start talking specific about guidance. But I'd give some general comments here. I mean I expect a lot of companies will forecast double-digit growth rates going into next year. So as you think about -- a lot of you looking at 2021. But I think most of that is because they're -- a lot of them are going to be coming out of a hole, right? They're going to have a certain amount of easy comps, especially if you look at like Q2 and Q3 this year. So they're essentially kind of making up for a lost year and getting back to 2019. We're in a very, very different position than that. We're forecasting double-digit earnings growth this year. So when we look at the trajectory that we have going into 2021, which is a trajectory of strong double-digit top and bottom line growth rates, I think that's pretty differentiated and pretty unique here because we're not coming out of that hole. Clearly, COVID testing is going to be a driver. It's going to be a big boost for us, and I don't expect that testing to go away. But another key component of it is our core businesses continue to improve. They're trending in the right direction. And I think a key aspect of that trending in the right direction is our pipeline. Our pipeline has been highly productive. We've got over 100 new products in pipeline across all of our 4 businesses that we have planned to launch over the next couple of years. So are there opportunities to accelerate what is already going to be double-digit top and bottom line growth rates? Yes, there'll be opportunities to be able to invest in this pipeline and accelerate the growth there. So I think we're very well positioned to go from what is a very strong year for us in 2020 to an even stronger year in 2021.

Okay. And just maybe following up on COVID testing here. I mean, obviously, your testing revenues are going to be up very sharply in the fourth quarter on the strength of Binax. It sounds like, just thinking about the earnings, could we be thinking about a COVID testing number this year that's certainly in excess of kind of $2.7 billion? Just want to get your commentary on that. And as you think about next year and you think about new test capacity, Panbio, how should be thinking or how are you thinking about sort of duration of testing relative to kind of a $2.7 billion base year in 2020?

Sure. So we had just under $900 million of COVID testing this quarter. I think it was just under $100 million favorable to some of the forecast there. A lot of that was driven by our manufacturing ramp-up, our scale-up and the new products we launched. So we actually exited the quarter at a higher run rate than that. That run rate into Q4 would be around $1.3 billion, $1.4 billion of sales at that run rate. But if I talk about COVID sustainability, I know this is a key topic here. I'd say when we talked about testing back in July earnings, I talked about the testing demand over 4 different phases: the pandemic phase, a recovery phase, a vaccine phase and a post-vaccine phase. And I shared that my view here was that a lot of the volume was still going to be in this kind of pandemic recovery phase. That even with the vaccine, you'd still get kind of more of a steady state. But a lot of the volume was going to be coming during this pandemic and recovery phase. I still think we're in this phase right now, David, depending on what country you are or state, you're in a pandemic, you're in a recovery. And I expect that to last definitely all next year. With the vaccine, you might see a trend of a little bit of a decrease on the PCR testing, I think, just -- and then maybe an increase in antibody testing. But I think the rapid testing is not going to go away like that. I think it's going to be around for a while just because it's easier to do, it's an easier sample, it's a faster result. So I think there's a lot of complexity here in trying to forecast whether COVID will ramp down and -- COVID testing will ramp down and when will it reach a steady state. So I've read some reports, it's 2 years, it's 3 years. I actually think if you're thinking long term -- strategically long term, that might not be the right question because I think it misses the point on what Abbott is actually doing right now. Yes, we've developed a lot of COVID tests. We've invested in manufacturing and selling them at affordable prices. That obviously helps the economy. It helps contain the virus. But what we're actually doing here, if you take a step back on a bigger picture, is we're actually executing on the vision that we had when we bought Alere, where we wanted to build a premier point-of-care business so that we could decentralize test, so that we could democratize test and so that we could digitize test. And if you look at what we've done with BinaxNOW, ID NOW, Panbio, I think those are perfect embodiments of that execution. So the COVID assay itself, when will it ramp down, 2 years, 3 years, okay, it will eventually ramp down to more of like a flu state kind of business. But the installed base that we built during this period, the consumer behavior that's been created, the new channels that we've opened up with rapid testing, whether it's airports, retail stores, more physicians' offices, the app ecosystem that we're building, all that is going to remain. And it will remain for all the other assays that we currently have and that we'll be rolling out. So I think that as we look at 2021 into 2022, it's going to be COVID testing, but it's more importantly to look, at least the way we're looking at it, is the execution of that Alere strategy, which is to build a whole new testing platform outside of the walls of a lab and a hospital. And the COVID has actually given us an opportunity to accelerate that strategy.

Our next question comes from Vijay Kumar from Evercore.

Congrats on a solid [ performance ] here. So Robert, maybe back on the fiscal '21 question. I guess maybe if I approach it slightly differently. Street numbers are EPS at $4.25. Based on the updated guidance for '20 of $3.55, that's still close to a 20% earnings growth. And I think implicit in those assumptions would be med tech procedures normalize. And obviously, that has a drop-down on margins. So I'm just curious, how should we be thinking about device procedures into Q4. Because like you said, the comp is an easy for you guys, right? I mean you guys -- you will be doing high singles organic in fiscal '20 versus declines or flattish for other -- some of your peers. So maybe if you could just unpack that a little bit and put that in context will be helpful.

Sure. So yes. I mean, as I said, looking into 2021, the trajectory -- the growth trajectory is those high strong double-digit top and bottom line, Vijay. And again, I think that's going to be predicated on 2 factors, just like we spoke about it in July in the earnings call, it's going to be the continued recovery of our base business and then, obviously, our ability to ramp up COVID and COVID testing. If you look at the businesses that were most hit by COVID, devices and core lab, so laboratory testing outside -- out of COVID, those have shown a really, really nice recovery starting in June, into July and then into the third quarter. September was actually our highest month of absolute sales in the quarter for both Medical Devices, especially in the cardiovascular area, across all areas. We saw a little bit of a July kind of pent-up growth as the lockdown started to get reduced a little bit. We saw that growth rate in July. A lot of that was some pent-up demand. So if you look at the third quarter, I'd like to look at it -- the trajectory from August to September. And when you look at that in our cardiovascular devices, those growth rates in September were much better than the growth rates in August. And the growth rates in September were better than the third quarter overall. And then that's true for both U.S. and internationally for both devices -- for devices. In Core Lab, we actually saw a nice growth in the month of September in the U.S., in Europe and in China also. So I like the rate of recovery that we're seeing in our base business. If you look at Electrophysiology, that was an interesting one, where when you look at the sales, we were hurt a little bit by the capital cycle, which is why we're only at about 2% or 3%. But if you look at the consumable part of our business, so -- which probably reflect better the return of procedures. So looking at mapping catheters and therapeutic catheters, we saw a high single-digit growth rate there. So our plan here is to continue to see that recovery. And it's not just about recovery of COVID and easing, it's also the pipeline. And we've got a very rich pipeline in our Cardiovascular area, too. And in our Core Lab business, the continued rollout of Alinity, improving our menu, expanding our menu, that's all helping us become more competitive in this recovery process.

That's a helpful commentary, Robert. And maybe one big-picture question on balance sheet. You guys are really in an enviable position here. Considering that we're in a 0 interest rate environment, maybe thoughts on optimal balance sheet structure here. And what opportunities do you see, if perhaps, on the inorganic side?

Yes. Listen, our financial strong here is very healthy. We're generating nice cash and we're allocating to our needs. We don't see any changes, Vijay, to our allocation strategy. We focus on paying a strong and growing dividend. It's part of our identity. It's different from a lot of med tech peers that don't have that dividend. So we're going to continue to support that growth of the dividend. We haven't done a lot of share repurchasing, mostly to offset our dilution. A lot of our investment here has been to drive organic growth. So taking our balance sheet and applying that cash to invest in areas where we see opportunities for growth, that's where we've been focused on. And I think that's the best return we've got right now for our shareholders. If you look at what we've done with COVID and the investments we've made there, the speed at which we've been able to make those investments and execute it is because of that strategic flexibility that we have in the balance sheet. Talked about manufacturing expansions with Libre, which we're definitely going to need as we expand the portfolio and build the portfolio and other parts of our Medical Devices, too.

Our next question comes from Robbie Marcus from JPMorgan.

Congrats on a good quarter. Robert, maybe we -- if we could spend a minute on diabetes here. You've had a lot of approvals over the past few months with Libre 3 in Europe, Libre 2 for a while now in the U.S. and then also the Libre Sense starting to move into the consumer area outside of diabetes. I was hoping you could talk about your expectations just for Libre growth, both U.S. and outside the U.S. Maybe when we could see a Libre 3 in the U.S., which would really help close the gap versus DexCom, and your thoughts on the non-diabetes component.

Sure, Robbie. Listen, I think Libre continues to perform really well. And as you saw, our pipeline continues to be highly productive. We had a good growth rate this quarter, over 35%. I thought it was a real nice sequential improvement versus Q2. And I think in Q2 our sales were just under $600 million, and Q3 sales were just under $700 million. So I think we had a nice sequential Q2 to Q3 kind of growth rate. We continue to focus on our strategy of kind of mass-market opportunity, mass-market potential and not see this as a niche play. We now have over -- more than 2.5 million users. That's significantly more than our next competitor. Regarding Libre 2 in the U.S. We were able to get the product on shelf -- in the retail shelf in mid-August. So we had about a partial quarter over here. But the customer response has been really positive. We've heard -- just you talking about closing the gap here with Libre 3. Listen, Libre 2, in my view, has already done that, and that's what we're hearing from our customers here. It's by far the smallest, easiest sensor to use, got the best accuracy, low range, high range, mid-range, adults, children. The readings every minute, which is unique to Libre, allows us to get a better alarm performance. And we can continue to mass produce it and sell it at a fraction of the price so that you're not really overburdening the health care system. So I think that's worked very well. Libre sales in the U.S., they actually grew 20% sequentially Q3 versus Q2 and about 45% year-over-year, and that's with just about 40 days' worth of sales of Libre 2 in the quarter. So I've seen positive momentum in some of the prescriptions. We -- because our strategy is focused more in the retail environment, we get to see that prescription data every week. So we're seeing nice trend from high prescribers. We're also seeing a nice pickup here for the pediatric endocrinologists segment. So we see a nice pickup in prescriptions over there, too. So I think it's obviously fairly early in the launch, but I think we're off to a great start. And I like what I've seen in the first 45 days. Regarding Libre 3. Listen, we always said that Libre was going to be a platform, and we're going to be building on this platform. And are we funding R&D programs to continue to innovate? Yes, we are. We'll have a Libre 4. We'll have a Libre 5. But we get so -- I think we get so caught up on every version over here, we might miss the bigger picture. And the bigger picture here is that to be able to sustain an ability to penetrate the mass market, you do need to have a variety of different platforms and continuously innovate. About bringing -- about timing of Libre 3 in the U.S. here, Robbie, I'm not going to provide details to you on that timing here. Obviously, the U.S. team is having a good time launching Libre 2 right now. What I would say is it's a very different segment than the cardiovascular device segment as it relates to clinical trials in the sense that we haven't seen the impact of kind of coronavirus slow down our trials here for -- within this space. So listen, you'll hear about Libre 3 approval when we get it and we issue a press release, just like we did with Libre 3 in Europe. On Libre Sense, listen, we've always talked about we could expand beyond diabetes, and this is our first step over here. The goal with this product specifically is to help kind of athletes achieve kind of better performance by using data, so they can kind of better fuel themselves to avoid fatigue. It's a different business model, Robbie. It will be a different business model, different channels. There'll probably be a different usage pattern and frequency in this segment. But obviously, if you look at the athletic training and sports population, it's a significantly large population here. So we've actually built a team that's separated from the diabetes group that's just focused on developing this opportunity. We've done an initial collaboration here, which I think is going to provide us a great visibility on how this kind of very large mass segment needs to be addressed and the different strategies we'll be able to kind of deploy.

Great. That was really helpful. And maybe just a quick follow-up. Robert, you talked about how the testing business in Diagnostics is more than just COVID. It's the whole platform. Alinity is just getting going now in the U.S. How should we think about Abbott share gains over the past few months? You've obviously made huge strides in COVID testing. It's a leading platform. Has that driven share shifts over to Alinity and some of your other platforms during this time that sets you up better going forward?

Yes. I mean I think we already had a real strong momentum before COVID with the rollout of the Alinity system. We're having great share gains, both in immunoassay and then the clinic chem business also. So that -- obviously, with COVID in Q2, a lot of the hospitals and the labs weren't focused so much on migrating of systems. But before that, we were renewing our existing contracts in the 90% range. And new tenders that were coming up for bid, we were in that kind of 45% to 50% kind of win rate. So you put that together and you look at our sales growth, we were definitely taking share. That -- the placements of instruments took a little bit of a pause in Q2. And as I said in the opening comments, we started to see a little bit of a pickup in September in terms of positive growth for all these geographies. And that's coupled with, again, a new cycle here of reopening of the tenders. I think that it's also allowed us, Robbie, with our position in COVID testing to be viewed as a more holistic partner to a large -- to large systems, whether they're in the U.S. or internationally, and that's ultimately helped us. I think one of the things that's definitely helped us in our Diagnostic business has been our molecular platform with the Alinity m launch. That's obviously had kind of a little bit of catapult effect with that launch. And -- but in that platform, we have more than just COVID testing. So yes, I think it's a good opportunity for us overall for Diagnostics.

Our next question comes from Larry Biegelsen from Wells Fargo.

A couple of product questions and then one big-picture question, Robert. Just on EPD, just the outlook there. It sounds like you started to see some recovery. And in Adult Nutrition, the strength there, can you talk about why you're seeing that strength and how sustainable that is? And I have one follow-up.

Sure, Larry. Yes, EPD, we definitely saw some more challenging market conditions in this quarter than what we had in Q1 and in Q2. If you look at how COVID kind of progressed a little bit, it hit the developed markets, I think, harder in Q2. And then the emerging markets, it hit us more in Q3, especially markets like India, Russia, some markets in Latin America also. But it -- when -- we look at a lot of the data, and we started to see a similar trend in September than what we saw in June in the developed markets, right? So you had that kind of drop, and then it starts to kind of recover. So I kind of look at the EPD as following the same trend that we saw in devices and core lab in Q2 but just a quarter later. So I think we'll see some of the recovery there. It's a good business. A lot of the portfolio is still very resilient. 50% of our portfolio is tied to chronic diseases. So that's the piece that, I think, kind of got impacted. The acute part of the portfolio has actually done pretty well. So we expect to see that recovery curve continue into Q4. On the Nutrition side, and your question was on adult, right? It was very strong growth in adult. And one of the things that the team did really well starting in Q2 is they started to look at our messaging regarding the immunity benefits of our Adult Nutrition. And they came out with a strong campaign, a strong messaging on the benefits on the immunity side, and that helped fuel the demand there. I think we saw probably at the end of Q1, there was a little bit of pantry loading, Larry. We saw that in the U.S., saw a little bit of that internationally, too. But what we did -- what we were able to do with that is we actually picked up new users and we picked up market share. So the combination of new users and market share and then the immunity messaging resonating with consumers and physicians has really kind of strengthened that portfolio. And I think it definitely sticks out a little bit in terms of our growth rate. But a lot of that, what we're seeing, is share gain and market expansion based on the data that we're seeing.

That's helpful. And then just one big-picture question. It sounds like COVID testing should continue to be strong next year. But if you have a -- get at some point where COVID testing declines because we have a safe and effective vaccine, how are you thinking about reinvestment and managing, potentially smoothing out earnings? Is there any thoughts kind of if we did see a decline in COVID testing, at some point, how you would manage that?

Yes. I don't think we're going to see that kind of decline in COVID testing. I think even with a vaccine, you're going to see kind of more of a steady state. And we've talked about that, and we planned for that. The other part of your question regarding kind of reinvesting in the business. Well, we're going to be able to do that next year and still deliver a pretty differentiated, unique kind of earnings growth and earnings power. As I said, we've got over 100 new products in our pipeline that we're going to invest in. We can either accelerate their development and their coming to market. We've got opportunities to expand market development. The opportunities that we have in MitraClip to be able to invest in that, strengthening of that market, strengthening our competitiveness. So I think we've got a great opportunity here with COVID testing to deliver differentiated earnings power and growth, while at the same time investing in this pipeline that Abbott has built over these years to sustain that growth rate. I'll just go back to the notion here that the COVID assay might go down to steady state. But if you think about the installed base that we're building because of COVID, especially on the rapid side, I think that's going to be a strong growth driver for us going forward. I mean I'll give an example of that. When we started the year in the U.S., we had over 20,000 ID NOWs placed in the in the U.S., in the U.S. alone. In 4 months, we've already doubled that placement rate by more physician offices, retail channels and a variety of universities and different channels. So what we're building here with the COVID test is an installed base that will then be able to run different kind of assays and different tests. And if it's -- if they're digital, if they're affordable, then the consumer behavior that's now today in COVID test and we believe is going to be there for all the other assays that we're building on.

Our next question comes from Bob Hopkins from Bank of America.

Congrats on all the good results this quarter. I just had 2 quick follow-ups. First, just on COVID testing. Does that $1.3 billion, $1.4 billion run rate that you highlighted include contribution from the OUS antigen test? Or is that more upside to come as that fully launches in the fourth quarter?

It's got some of it in there, Bob. Obviously, when you're doing this kind of ramp up the way we're doing it across continents, very different platforms there, we want to make sure that we can deliver. So in that number, you've got some of that international antigen there. But obviously, we're working that -- we could probably do a little bit better than that in that international antigen also. So...

Okay. And then just one follow-up on the device side ex diabetes. I was wondering if you could talk a little bit about vascular in Q3 as that was down, I think, 10%, which is a little worse than some of the other businesses. And then more importantly, Robert, I'd love to get your view, just like based on everything you're seeing right now, what are your directional thoughts on the outlook for 2021 for Medical Devices ex diabetes? Is there -- should we be thinking about that as potentially close to normal in terms of the business? Or just how much uncertainty do you think there is as we think about devices for next year based on what you're seeing now?

Sure. On the outlook there of devices, I would say -- listen, I think that we had a really big impact in Q2 across the world, U.S. and internationally. Because I think a lot of -- this was a new thing -- this was a new virus and the shutdown was pretty dramatic, was pretty significant. As I think about our device portfolio, there are still cardiovascular needs. People still need to get a pacemaker. There's still a need for mitral repair. There's still a need for ablation for AFib. I mean those are all conditions that the reason we're in them is because there were medically scientific needs for us to be in them. So I see the market is still an opportunity for growth. And I think that the hospitals and hospital systems have learned now how to deal with that and how to deal with that pandemic. You've seen certain systems kind of focus on treating COVID and keeping other hospitals more focused for electives. So I think that's -- I believe the device portfolio that we've built is relevant, is important. And even in a COVID kind of world, those are medically necessary procedures. And we're working with hospitals to assist them in opening. And we'll see it continue to grow. We've seen a nice progression from Q2 to Q3. I expect that progression to continue into Q4. Yes, there could be some lumpiness here and there. But I think the progression is going to be positive. And my expectation is that we'll see kind of devices get back to that growth rate that we previously had in those high single digits next year.

And then on vascular? Sorry.

Oh, on the vascular question. Yes, we had -- it's interesting. If you look at the device portfolios that were a little bit -- didn't recover as fast, it really was vascular and CRM. I think some of those are affected by some of the pricing dynamics that still exist in that channel. Vascular, you've got an average price erosion there of 5% to 6%. So once you exclude that, it would probably be a little bit better. But there's a little bit of a slower kind of recovery. We did see vascular is right now at about 95% of their kind of pre-COVID levels. So there's been a rebound, but I think there's been a little bit of a price impact there also.

Our next question comes from Joanne Wuensch from Citibank.

Actually, there are 2 of them, and I'll put them up front. Can you give us an update on your Structural Heart platform and what we might be looking forward to in the next 12 to 18 months? And then my second question is, it sounds as if you are more leaning towards reinvesting some of the COVID-19 revenue versus sort of tuck-in M&A. Can you just give us an idea of how we should think about how much of the upside actually flows through to EPS versus how much of it gets invested?

Sure. I think on your Structural Heart question here, I think we've got a leading kind of portfolio of products here. We've launched a couple of novel products this year. TriClip for the tricuspid valve repair. And then Tendyne, which is the first product for mitral valve replacement. Those have actually gone very well. Especially when you're going to launch novel products like this, you want to kind of build evidence. You want to kind of build your way into it. So everything that we had planned for those 2 product launches really didn't get much impacted by COVID because we didn't have kind of significant sales attached to them, more about kind of developing the clinical evidence. So that's gone very well. If you -- your question in the next kind of 12 to 18 months, I think we've got a really rich pipeline here. Obviously, the biggest opportunity we have is to expand the mitral valve repair with the NCD for the secondary MR indication. That will be a big driver for us. We've seen already patient referral networks starting to be built around waiting for that indication -- that reimbursement approval. But we've got several of the products in the pipeline. I think Amulet, our left atrial appendage device, is going to be a great opportunity. It does very well from a share perspective internationally. The larger part of the market is here in the U.S. So we're looking forward to enter that market here in the U.S. We've got a next-gen TAVR device called Navitor that we've been working on. This will be our third iteration. We've launched our FlexNav product in Europe this year with an improved delivery catheter and gotten good feedback from implanters over there. And then I think that TriClip and Tendyne are multibillion-dollar opportunities here for us that are, as I described, very, very early in the innings. So I'm very excited about that Structural Heart portfolio in the next 12, 18 months. It's probably one of our richest portfolios in our device portfolio.

There was a second question, Joanne. I -- we didn't grab it here. Can you repeat the question?

Of course. The second question was there's -- you're one of the few companies in med tech land that's going to have the benefit from COVID-19 diagnostic testing and the revenue associated with it. I'm trying to think about how, as we look forward, that revenue either is reinvested or flows through, or maybe you'll redirect it towards targeted M&A?

Yes. So again, we're trying to triangulate here as much as we can, but we're not going to put out a specific number. What I can reemphasize here is that COVID is definitely going to be a big boost for us, continue to be a big driver for us into 2021. We're in a unique position. We're not coming out of a hole. We're going to be delivering what I would say very high strong double-digit top and bottom line. And in doing that and in delivering those very high double-digit top and bottom line after double-digit earnings this year, we're still going to have plenty of opportunity to put investment into R&D and into sales and marketing to continue to drive not only the pipeline but all the opportunities that we've had that we've talked a little bit about here. Whether it's Libre, whether it's Structural Heart, whether it's in Nutrition, we've got plenty of opportunities. So I guess the -- I'll leave you there, Joanne, with we've got tremendous momentum, strong 2020. We're going to have a stronger 2021. And we realize that we've got a unique opportunity here with over 100 products in our pipeline to be able to kind of fund and drive on top of our double-digit earnings and top line growth next year.

Our last question comes from Josh Jennings from Cowen.

Robert, I was hoping you could talk a little bit about the Medical Device franchise. And following up on Bob's question just on the outlook, but just thinking about how you're setting internal targets for your med device sales team or just internally how you're going to judge success. I think there's -- I'm confused about how we should be thinking about it, our team independently for the whole sector. But I mean are you thinking about sequential improvement as we get into Q4, Q1, Q2 next year as kind of a solid target to think about kind of a performance level? Are those the type of targets you're setting for your sales force? Or are you looking back at 2019 over the next 3 quarters and think about that being the base in terms of how you're incentivizing your sales force?

Yes. We're looking for steady improvement quarter-over-quarter, and that's how we've kind of set our targets. I mean I think the ultimate measure here of success and of winning is market share and market share gains for those products where we're competing more head-to-head. And then for other products where we're unique in the space, whether it's mitral or tricuspid, et cetera, then we're looking at market development and market expansion. But to your question here, it's all about kind of steady sequential quarter-over-quarter improvement. Do I think we're going to be at 10% Med Device growth by the end of this quarter? No, I don't. But do I think Q4 is going to be better than Q3? Yes, I do.

That's helpful. And then just wanted to ask on COVID testing, just focusing on the serology segment. Can you give us the state of the affairs for the demand level for COVID-19 antibody testing in the U.S., internationally currently and then how you see that demand evolving? I think you've said maybe in the last earnings call that vaccine -- success with the vaccine programs could drive some incremental demand on the serology side.

Sure. Yes. I mean when it first happened, we were fast to take advantage of the installed base that we had with our Alinity and our architect systems here to develop a blood antibody test. And we also developed lateral flow rapid antibody test. And I would say we haven't seen the kind of demand that we thought we would see when we were putting those programs together. So in our numbers here, I think we've kind of excluded them. But do I think that there's an opportunity for antibody testing as the vaccine gets rolled out? Yes, I do. And I see the opportunity for lab-based and for rapid lateral flow testing also. We've seen some governments already mandate on every blood draw for other tests to check for antibodies. I think that's just going to get more intense when the vaccines get rolled out. So I think there's -- there'll be an opportunity there. And Abbott will be in a unique position there to be able to capitalize on that. So I'll just kind of wrap up here. We've had a nice growth step-up during the third quarter. We achieved double-digit top and bottom line growth. The businesses, we spent some time talking about the businesses that were hardest hit by COVID. We can see that they're all trending in the right direction and showing sequential steady improvement. Our pipeline continues to be highly productive. We've got a lot of ongoing launch activity across all the businesses in the markets here. And we've expanded our COVID testing platforms, adding more testing platforms, adding more capacity. I don't think that COVID testing is going to go away anytime soon. And I think it's big, and I think that Abbott's in a unique position with not only the platforms that we've developed but the manufacturing and supply chain that we've assembled. We've increased our full year guidance, which now reflects double-digit EPS growth. And I think that's pretty unique and differentiated in this environment, and I think it's a testament to our ability to execute and deliver across our diversified portfolio. And I think we're well positioned to go from what is a very good, strong year for us to an even better one in 2021. And again, I think we're pretty uniquely insulated here against kind of any kind of COVID reemergence scenarios. So with that, I thank you.

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 a.m. Central Time today on Abbott's Investor Relations website at abbottinvestor.com. Thank you for joining us today.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect. Everyone, have a wonderful day.