Abbott Laboratories (ABT) Q2 2023 Earnings Report, Transcript and Summary

Good morning, and thank you for standing by. Welcome to Abbott's Second Quarter 2023 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 of Relations.

Good morning, and thank you for joining us. With me today are Robert Ford, Chairman and Chief Executive Officer; and Bob Funck, Executive Vice President, Finance and Chief Financial Officer. Robert and Bob will provide opening remarks. Following their comments, we'll take your questions. Before we get started, some statements made today may be forward-looking for purposes of the Private Securities Litigation Reform Act of 1995, including the expected financial results for 2023. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward statements. Economic, competitive, governmental, technological and other factors that may affect Abbott's operations are discussed in Item 1A, Risk Factors, to our annual report on Form 10-K for the year ended December 31, 2022. Abbott undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law. On today's conference call, as in the past, non-GAAP financial measures will be used to help investors understand Abbott's ongoing business performance. These non-GAAP financial measures are reconciled with comparable GAAP financial measures in our earnings news release and regulatory filings from today, which are available on our website at abbott.com. Note that Abbott has not provided the GAAP financial measure for organic sales growth on a forward-looking basis because the company is unable to predict future changes in foreign exchange rates, which could impact reported sales growth. Unless otherwise noted, our commentary on sales growth refers to organic sales growth, which is defined in the quarterly results press release issued earlier today. With that, I will now turn the call over to Robert.

Thanks, Mike. Good morning, everyone, and thank you for joining us. Today, we reported second quarter adjusted earnings per share of $1.08, which reflects an acceleration in the contribution from the underlying base business. Organic sales, excluding COVID testing, increased low double digits for the second quarter in a row and was led by mid-teens growth in Medical Devices, along with double-digit growth in Established Pharmaceuticals and Nutrition. On our last couple of earnings calls, I've highlighted improving underlying demand trends across our businesses. These strengthening trends continued in both our institutional and consumer-facing businesses this past quarter. Within the institutional businesses, health care systems around the world have continued to improve their ability to expand the supply of health care services through ongoing efforts to adjust protocols, manage the labor challenges and increase the overall available capacity to treat patients. In our more consumer-facing businesses, we're seeing consumers prioritize spending for health care products, which is driving increased demand for our products in the U.S. and internationally. I'll now summarize our second quarter results in more detail before turning the call over to Bob, and I'll start with Nutrition, where sales increased 10% in the quarter. In the U.S., growth was led by Pediatric Nutrition growth of more than 20%. We continue to make good progress in increasing manufacturing production and have now recovered approximately 75% of the market share in the infant formula business that was lost last year as a result of the voluntary recall. Internationally, total Nutrition sales grew 6%, led by growth in both Pediatric and Adult Nutrition businesses. Turning to Established Pharmaceuticals, sales increased 12.5% in the quarter. This strong performance was led by growth across several markets, including India and China; and therapeutic areas, including gastroenterology, women's health and CNS pain management. This business continues to execute at a high level and capitalize on the favorable demographic and socioeconomic trends in emerging markets. Moving to Diagnostics. Excluding COVID testing, organic sales grew 7%, led by Core Lab Diagnostics, where sales grew 10%, driven by performance in the U.S., Europe and China. This broad-based strong performance reflects the increased demand for routine diagnostic testing globally. And in the U.S., our blood transfusion testing business continues to make good progress, recovering from the impact of lower plasma donations that occurred during the COVID-19 pandemic. And I'll wrap up with Medical Devices, where sales grew more than 14% on an organic basis, including double-digit growth in both the U.S. and internationally. In Diabetes Care, FreeStyle Libre sales exceeded $1.3 billion in the quarter and grew 25% on an organic basis. During the quarter, Libre became the first and only continuous glucose monitoring system to be nationally reimbursed in France for all people with diabetes who use insulin. This achievement was a direct result of the unique value proposition that Libre offers, a fully featured continuous glucose monitor made available at an accessible price. Abbott has led the way in expanding reimbursement coverage for continuous glucose monitors in order to bring the benefits of this life-changing technology to more people around the world. In cardiovascular devices, sales grew more than 10% overall in the quarter, led by double-digit growth in Electrophysiology and Structural Heart. In Electrophysiology, performance was led by international growth of more than 20%, which included high teens growth in Europe and strong growth in China. During the quarter, we received U.S. FDA approval for our TactiFlex ablation catheter, the world's first ablation catheter with a flexible tip and contact force sensing technology, which helps to deliver improved procedure outcomes and faster procedure times. In Structural Heart, performance was driven by MitraClip growth of approximately 10%, along with growth from several recently launched new products. Earlier this year, we submitted for FDA approval for TriClip, our minimally invasive tricuspid valve repair device that helps treat a condition on as tricuspid regurgitation, a leaky heart valve disease. The clinical trial data supporting our submission showed that TriClip is a highly effective and safe treatment that provide a significant improvement in the quality of life for patients. TriClip is currently being reviewed by the FDA, and we look forward to bringing this first-of-its-kind technology to patients here in the U.S. In Rhythm Management, growth of 8% was led by Aveir, our recently launched leadless pacemaker. And during the quarter, we received FDA approval for our dual-chamber leadless pacemaker, a first-of-its-kind technology that allows for 2 pacemaker devices to communicate with one other inside the body to provide minimally invasive treatment for those with abnormal heart rhythms. Aveir was specifically designed to be upgradable and retrievable in order to evolve with patient changes and therapy needs over time. This unique technology offers the potential to revolutionize care for millions of people who require a pacemaker. And lastly, in Neuromodulation, sales grew 16%, driven by the recent launch of Eterna, our first rechargeable neurostimulation device for pain management, which targets a large segment of the market where we previously did not compete. During the first half of this year, we introduced several new innovations, including the launch of Eterna, and label indication expansions for treating painful diabetic neuropathy and chronic back pain for those who have not had or are not eligible for back surgery. So in summary, we exceeded expectations on both top and the bottom lines. Growth in the underlying base business accelerated, driven by improving market conditions and contributions from both new products and legacy growth platforms. And our pipeline continues to be highly productive, which will sustain our strong growth profile in the future. I'll now turn over the call to Bob. Bob?

Thanks, Robert. As Mike mentioned earlier, please note that all references to sales growth rates, unless otherwise noted, are on an organic basis. Turning to our second quarter results. Sales decreased 9.2% on an organic basis due to, as expected, a year-over-year decline in COVID testing-related sales. Excluding COVID testing-related sales, underlying base business organic sales growth was 11.5% in the quarter. Foreign exchange had an unfavorable year-over-year impact of 2.5% on second quarter sales. During the quarter, we saw the U.S. dollar strengthen somewhat versus several currencies, which resulted in a slightly more unfavorable impact on sales, compared to exchange rates at the time of our earnings call in April. Regarding other aspects of the P&L. The adjusted gross margin ratio was 55.4% of sales, which reflects continued flow-through impacts from the elevated inflation we experienced last year on certain manufacturing and distribution costs as well as an unfavorable impact from foreign exchange. Adjusted R&D was 6.4% of sales, and adjusted SG&A was 27.2% of sales in the second quarter. Lastly, our second quarter adjusted tax rate was 14%. Turning to our outlook for the full year. We now forecast total underlying base business organic sales growth, excluding COVID testing sales, to be in the low double digits. We're now forecasting COVID testing-related sales of around $1.3 billion, which is below our full year forecast of around $1.5 billion that we provided in April due to current testing dynamics, including lower demand for testing, following the end of the public health emergency in May. For the third quarter, we forecast COVID testing sales of around $100 million. Based on current rates, we expect exchange to have an unfavorable impact of a little more than 1.5% on full year reported sales. Lastly, our full year adjusted earnings per share guidance of $4.30 to $4.50 remains unchanged, but reflects a lower earnings contribution from COVID testing sales compared to expectations in April, offset by raising our underlying base business earnings forecast by approximately $0.05 based on our strong performance and outlook. Compared to the initial guidance we provided back in January, we have now raised our underlying base business earnings forecast by more than $0.15, offsetting the lower contribution from COVID testing versus our initial forecast. Turning to our outlook for the third quarter. We forecast adjusted earnings per share to be approximately $1.10, which reflects strong growth on the underlying base business. We forecast total underlying base business organic sales growth, excluding COVID testing sales, to be in the low double digits, and exchange to have an unfavorable impact of a little more than 1% on our third quarter reported sales. With that, we'll now open the call for questions.

[Operator Instructions] And our first question will come from Joshua Jennings from TD Cowen.

Congratulations on another strong quarter. The core business is generating nice momentum. Organic sales growth accelerating, earnings power increasing. Robert, it would be great to hear your views, first, on the drivers of the back-half momentum, assuming an updated low double-digit organic revenue growth forecast for '23. And then second, it'd be great also to get your thoughts on the sustainability of this building momentum in '24 as the business is creating some more challenging comps for next year.

Sure, Josh. Yes, it was a very strong quarter, broad-based growth. And -- but listen, I still think that we could do better, and I know my team feels that also. If you go back a little bit in terms of a couple of years when COVID was happening, we always said that there was a great hedge share for us, right? And when COVID would subside, we would have a strong base business and making investments. And I think that's what you're seeing right now play out in these last couple of quarters and what we think is going to continue to play out throughout the rest of the year and going into 2024. We saw a very strong growth across all 4 sectors, excluding the COVID testing piece of it. And as I said in my opening remarks, the institutional business, the consumer business, there was an acceleration from Q1 to Q2, growth versus Q2 of last year. So all the right indicators here trending positive and with great momentum. Devices and Diagnostics, there was a nice step up. I attribute that really good improving market conditions, whether it's the hospital systems addressing some of the bottlenecks that they had in care, but also markets that are reopening and that trend continuing, but also new products. So market conditions was part of it, but new product launches also contributed quite a bit there. EPD has sustained, I'd say, high single-digit, low double-digit growth the last 2 years, and I think that continues. I think we're probably one of the best-positioned large health care companies in emerging markets. We've got a unique strategy there, a lot of regionalization and a lot of local for local, and the team does a really good job at executing that. The double-digit growth in Nutrition was as expected. We're seeing the recovery in the Pediatric business, recovering our market share. My comment there of the 3 quarters of recovery is more general and broad-based. But once you start looking at different segments of the -- and from the market, different SKU sets and different types of form, there are certain segments where we're already back to leadership position. So that's moving it all in the right trajectory. And Adult is doing very well in several countries. So COVID declined as we had forecasted. We decided to bring our COVID number down a couple of hundred million dollars because we're seeing -- as the public health emergency ended, we saw a little bit of a decline in testing there. So we'll see how that's going to play out in Q4. It's probably at the first quarter, we'll see, Josh, of an endemic respiratory season. So we'll see how that's going to play out. But the base business is doing really well. And I'd say, from a geographic perspective, it was pretty broad-based also across all geographies: U.S. Europe, Asia. Obviously, China reopening was really positive, too. But it wasn't like this over-indexing in our growth rate with China opening. I mean if you look at our growth rate, excluding China, it was -- it only added about 1 point of growth to that 11.5%. So it's pretty broad-based across the market. So pleased with the top line. We believe it's very sustainable, which is why we increased from at least high single to low double-digit growth rate. And I think the pipeline and the productivity is another kind of key aspect in our quarter, a lot of product approvals, and that's going to drive it. It's probably a little bit early to kind of go through a specific guidance for 2024. But I think if you look at this COVID decline, this anticipated COVID decline that we had this year, I think it's kind of overshadowed a little bit about the strong and the strength in the performance in the base business. And you're starting to see -- as that number comes down in COVID, you'll start to see really the strength of the base business. So if you look at the base business, it's contributing about $4.10 of earnings for the full year this year. That's about $0.15 higher to what we originally guided back in January. And I think that's pretty significant growth, even at $4.10 on the base business, and that's really been driven by top line. So you look at the leverage in the P&L, the investments we made during COVID were able to drive a lot of growth there. So pipeline is delivering pretty significantly. And I believe that, that is the sustainability going into 2024, that top line. Of course, gross margin is a constant area of focus for us, whether it was the impact of FX or the impact of inflation. But I'm already seeing 3 out of our 4 major businesses here showing improved gross margin profiles versus the end of last year. So we're seeing good momentum over there. So if I put this all into account, I think we're achieving a lot of growth, top and bottom line, the new product contributions, strong pipeline and then the opportunity that we'll have for gross margin expansion. So I think we're well set up as we go into the second half of this year and as we go into 2024.

And our next question will come from Larry Biegelsen from Wells Fargo.

Congrats on the nice quarter here. Just one for me. Robert, I'd like to hear your thoughts on the med tech top five and the pipeline, specifically how you're thinking about Aveir and the dual chamber approval and TriClip you mentioned earlier, and just the sustainability of that 11% cardio neuromod growth we saw this quarter.

Sure. Well, that group of products, they did pretty well in the quarter. Combined, those products, they grew about 40%, Larry. If you take the Q2 run rate and annualize it, it's annualizing to about a little over $650 million. I expect to do better than that in the year as the next quarters progress. Regarding your question on these products, I can go through some of them here. I mean, on the Aveir side, we saw a lot of positive developments this quarter for leadless. If you remember, we received FDA approval for the single chamber last year. And if you look at some of the claims data, at least the claims data that we're looking at, showing that we'd be able to capture about 1/3 of that market. So that's doing really well. But what's really exciting for us, and quite frankly, it's a lot of KOLs that I've spoken to, especially at HRS this year, was the approval for the dual chamber, which is a much larger segment of that makes up at least 80% of that $3 billion worldwide pace market. And it's the first-ever technology, right, where you've got 2 implanted devices communicating with each other. So it's a huge opportunity for us, I think, to really change paradigm here. It's a little bit of a different implant than what EPs have been accustomed to doing, with pacemakers that have leads. So our focus here at the beginning, I think, is really to look at the bigger part of the market and make sure that we do a really good job at creating a real-world kind of strong clinical results, making sure that the implant technique gets well understood. And so we'll focus a lot on training and training physicians. We'll be opening new centers, of course, but we're going to -- this falls in the bucket, Larry, of just making sure that we go at the right tempo out of the gate so that we've got a bigger eye on the larger market and the larger conversion because I think that that's a huge opportunity for conversion over there. So there, I'm very excited about, and the team is already starting their launch plan here. Amulet grew 25% this quarter, which is a great growth rate. And again, we're also focusing on generating great real-world clinical results there, being thoughtful about how we open the accounts, build a strong, sustainable position. This is a fast-growing market. It's a great opportunity for us. And so that's done well. And TAVR with Navitor, again, our quarterly sales, we're looking at this the other day. Our quarterly sales have roughly doubled in the last 18 months. Now, yes, granted it's a smaller base, but I'm just hearing really good feedback from the implanters now, once Navitor is out, regarding the implant technique, regarding the outcomes. So I think we're building a really good position here, obviously, in the U.S. following the launch, but internationally seen real strong performance, whether it's market share gains or our ability now to open new accounts with this new product. And then TriClip is, we're seeing similar international performance. Physician enthusiasm here continues to build as now they've got this much better, I'd say, a real effective option here to treat patients that are suffering from TR. So -- and I think the publishing of the TRILUMINATE data earlier this year really gave a boost to those international markets. I mean, we had clinical data out there, but the TRILUMINATE data, I think, really, you can see this correlation in terms of what we're seeing in terms of implants there post publishing that data. So I'm excited to bring it here to the U.S. I mean, we submitted it to the FDA earlier this year. The clinical data that supported the submission, as I said in my opening comments, is really strong, great quality-of-life improvement. I'm enthusiastic about the opportunity in the U.S. I mean, it's a PMA submission. We submitted in January. So we didn't necessarily bake in any kind of significant sales this year, but I think it's a great contributor for us next year. So -- and then on neuro, I mean, this market moves a lot with innovation. And we introduced quite a bit of innovation, I would say, over the last 6 months in this market. There's great opportunity to execute on that, and there's more to come also in that business, too. So I look at the cardio and neuro business, just with these products that we've mentioned here, this group of products that we recently launched, billion-dollar segments, and that we're in the early innings. So I'm excited about it, and I think these got a lot of momentum and sustainability on our cardio and neuro business, Larry.

Our next question comes from Danielle Antalffy from UBS.

Robert, I do have 2 product-specific questions, but you totally stole my thunder with that very thorough answer there. But if I could follow up on specifically Libre and MitraClip. So did see U.S. deceleration in the quarter for Libre. Just wondering what you're seeing out there. You have a competitor launching a new product, but you guys are launching Libre 3. And you do have the basal coverage for Medicare now, but how you see basal ramping? That's the first product question. And then the second question is on MitraClip. And another -- a quarter was fine, but this is a market that had been growing double digits pre-COVID. Just curious about where you think this market falls out on a normalized basis once we're through staffing constraints, once we get through what feels like a little bit of an air pocket in the patient population given the high mortality rates through COVID. So those are my 2 product questions.

Okay. Thanks. So on your Libre question, we had a really strong quarter there, Danielle. We grew 25%, yes, 30% in the U.S. I think it's pretty strong growth still. And internationally, we're up 22%. So that's very positive now that we've kind of put behind us some of the upgrading activities that we are doing towards the second half of last year, so you're seeing the impact there. The basal is a great opportunity. In my comments, I referenced France. Yes, this wasn't just like a tender award. The French authorities looked at claims data. They looked at data from basal users using the product. We've got over about a 70% share of that market. So they looked at it and say, "Wow, this is really having an impact". So that's good. It provides us great momentum. You look at -- now you've got U.S., Japan and France reimbursing for basal. I mean those are 3 of the top 5 markets in the world, and we're well positioned there. U.S. coverage began in April. So that's playing out nicely also. So I think we got great momentum here. I'd say what's really exciting is a lot of the upcoming launch activity and pipeline activity that we'll have in the second half of this year. If you look at our integration with pumps, it's my understanding here that sometime in this second half, we'll see Tandem integration with our CGM system here in the U.S., and that will be exciting. One of the things that we've also got rolled out and planning is, as you might remember, we got L3 approved full iCGM. But together with that approval, we also got a 15-day claim. So we'll be launching our 15-day sensor here in the U.S. second half -- in the second half of this year. So that's exciting, too. And the team is on target here to start and initiate our glucose-ketone dual-sensor trial sometime in Q4 here. So a lot of pipeline activity in the second half. Probably the one that I'm most excited about, Danielle, is actually Libre 2 streaming. I think this is an incredible opportunity and what the team has been able to do. I think it's the most exciting launch that we have in the second half here, which is really our ability to convert our entire Libre 2 base from scanning to be able to have real-time streaming through an app update. We ran our first conversion in the U.K. over the weekend. There were some challenges there as we rolled it out. Team worked over the weekend. But as of -- I think as of end of day, Monday, 90% of the user base was converted. And the social media posts that I've been seeing are just incredibly positive. So just think about our ability here to convert our entire L2 base into a slightly smaller version of L3 across the world with all the manufacturing capacity we have. So I'm really excited about that. So I think Libre is on a great trajectory, great momentum. And I think that's going to continue. Regarding your question on MitraClip, yes, I think the performance was -- I think it was pretty strong, 10% growth. International was up 20%. So U.S. was more modest. And I think you pointed to some of the challenges that we are seeing. I'm not sure it's so much the staffing portion now, Danielle. I mean, I think it was probably in the second half of last year. We're not seeing that in the other parts of the business. So I think the U.S. piece here is really our ability here to reignite and restart that referral funnel here in the U.S., which was impacted by the pandemic. And I think this is going to take a little bit of time, but it's a key -- it's a key area of focus of the U.S. commercial team here is to really look the commercial and the clinical team to really restart those that referral process from the cardiologists into the hospitals. This is a -- continues to be an attractive growth area, and you can see that. Where we don't have some of these issues here in the U.S., we're looking internationally to accelerate as a way to kind of balance it out. And we're seeing great growth internationally here. So the market is still very attractive. We're having a lot of success internationally. And in the U.S., we're going to focus on this patient referral funnel here, and I think we'll start to see kind of improvements in the numbers.

Our next question will come from Vijay Kumar from Evercore ISI.

Congrats on a solid print here. Robert, I had a 2-part question. One, you did mention double-digit organic sort of base. Is that -- like should we worry about the comp issue for fiscal '24? Because I'm thinking about Lingo, which I think is just launching, is that enough to sort of maintain some of the strength we're seeing? So any comment on Lingo launch, update on Lingo would be helpful. And my second part is on gross margins, down sequentially. If I'm looking at that 56% overall for the year, it looks like we're probably looking at bottom half of the EPS guidance. I know you had mentioned $1 billion of inflation impact. How should we think of that benefit in margin expansion in back half of year '24?

So yes, I'll take the Lingo question, and then I'll ask Bob to fill in on the gross margin. On the Lingo piece, listen, this has been part of our strategy, Vijay. It wasn't -- it was an afterthought as we were building Lingo platform. We knew it would be in this situation where can we expand beyond diabetes. We've been very thoughtful about it and very intentional about it. The opportunity during COVID to invest heavily in this was our opportunity. And as I've said in the past, to be thoughtful about this, we had to create a separate group, a fully dedicated group. I was with them a few months ago. And if you look at the team, the scientists, the engineers, the data experts, the marketing team, et cetera, they're just focused on this. But it's interesting, their backgrounds here aren't necessarily with diabetes, right? They're more digital health, they're more consumer health. And they've got this target, which is to do something that not a lot of well-established companies, health care companies do, which is to create a product that's really targeting a healthy population and a healthy population that wants to stay healthy. So the product was launched yesterday in the U.K., kudos to Lisa and the team for getting that through. And the value proposition is pretty simple. And I think that's how we needed to think about it for this patient segment here -- for this consumer segment, sorry. And it's really to deliver personalized like metabolic improvement and metabolic health. And the way it does that, Vijay, is that it's teaching you about glucose spikes. It's teaching the consumer about how your body reacts to food, how it reacts to sleep, how it reacts to exercise. And the goal is to minimize those spikes throughout the day. So the Lingo coach, it learns -- it first learns about your metabolism, right? And then after it learns about your metabolism, by wearing the sensor, it then assigns you a daily target, and we're going to call this the Lingo count. And this is basically a number that is the amount of spikes that you're allotted to or assigned to during the day. And we're going to track that daily progress and track to that target. And we believe that, that's a great kind of behavior modification tool for those that don't have diabetes. Their charts, there's data. There's all that, that you have in the app. But we believe that the simplicity of this Lingo count is really key to modifying behavior. It's a subscription-based model. It's direct to consumer. We are looking at opportunities for partnership, but it's direct to consumer. The website -- the web shop is open. And the pricing is pretty much in line with our cash pay price for Libre. And I think the key aspect here is -- for this app, is that we have to constantly provide content to the app, constantly new information, new data. And if I think about everything that's going on in the world of AI, and I think about -- how I think about AI for Abbott, we have a lot of opportunities. I would put this one here together with Libre as our biggest opportunity to capitalize on AI and what it can do for personalization. So it's out in the U.K. It's launched yesterday. We'll study. We'll learn from the U.K., and then we'll roll it out to other markets. I'll preempt your question, which is always like, is it going to come to the U.S.? Yes, it will. We intend to file in the U.S. at the end of the year. I don't expect big contribution right now from a financial perspective early on. Maybe my team will surprise me, but I absolutely expect this to be a significant contributor over time for us. And so that third part of the growth stool here for that platform is out of the gates, and we're excited to see what we can do.

Okay. So Vijay, on the gross margin question. So back in January, we guided a gross margin profile of 56% of sales for the full year. And through the first half of the year, the base business, so excluding COVID testing, is right in line with that. We are, however, seeing lower gross margins on our COVID test do -- really due to the significant decline in volumes that we've seen compared to our assumptions at the beginning of the year. And so that's really what's being reflected in a little bit lower gross margin that you've seen. And I think for the balance of the year, we would expect to see gross margins roughly in the range of 56%, and then we would look for steady improvement after that. As Robert talked about, it's a key focus area for us. Each of our businesses have gross margin improvement programs in place, with teams that are dedicated to that effort. And as -- so as we work into 2024, we would expect to see some improvement overall in our gross margins.

Our next question will come from Joanne Wuensch from Citi.

Briefly, can you sort of tear apart the Electrophysiology growth rate of 17%? How much of that is in the U.S.? How much of that is oUS? And what do you think is driving that? And then I'll just jump in with my second question, which is, if you have reclaimed about 75% of the Pediatric Nutritional business, can you get to 100%? Or do you think you're more or less where you can get to?

Sure. So really good growth on EP. We're up about 17% total. U.S. was high single digits, around 9%. International was about 24%. In that 24%, Joanne, there's probably about 8 or 9 points of kind of China recovery. So if you look at the growth rate internationally outside of China, that was about 15%. So real strong growth. Again, if you look at Europe specifically, it was up just under 20%. So it's pretty broad based. And even if you look at the big 5 countries in Europe, did really well there. TactiFlex in those countries, that's been out there for a couple of quarters right now. We only got approval in the U.S. towards the end of the quarter. So that's doing really well, and it's really helping. We got really good feedback on the catheter. So growth is doing very well. The U.S. is probably a little bit impacted by kind of the capital cycle. If you remember, last year, we launched EnSite X, and it was like a very large bolus of kind of upgrading and capital placements that we're making. We get a lot of good feedback on the system, both from the users and from the administration, especially the fact that it's an open system. So that's done very well. If you look at the consumable part of the U.S. growth, it was up in the mid-teens. So that, I guess, the term used was tear apart the EP growth rate. But again, it's a great market. We've got a great position and good recovery, and I expect to see this continuing throughout this year. And sorry, what was your other question?

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

No, I kind of made my team, and I also kind of said publicly that our target here is to get back to 100% of our market share by the end of the year. A big driver of that is the manufacturing and the manufacturing kind of ramp up. And we started the manufacturing -- reopened the manufacturing process in July for specialty of last year and August and September for non-specialty. So that manufacturing has provided us the supply we need to fulfill the demand. We've got a very strong brand in Similac, and you're seeing that. So -- and as I said, I think maybe to Josh's question at the beginning, if you look at the different segments, first of all, if you start with WIC and non-WIC. In the WIC segment, we're back to leadership position or back to our position we had before the recall. And that was because we focused a lot on that Q3, Q4 time in that segment. So I guess, long-winded to say yes. I mean, we're still on target for that to be able to get to the end of the year with our pre-recall market share. So -- and like I said, if you pull -- if you break out some of the different formulas because there's a lot of different SKU sets and different types of formulas. In some of them, we've already -- we're already back to where we were before recall. So team's working really hard at this, and I'm not changing that target.

Our next question comes from Marie Thibault from BTIG.

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

Sure. I think we had a really, really good recovery here. As the health systems are opening up, you're seeing that routine testing come back. And like I said, it was pretty broad-based, U.S., Europe, Asia, Asia without China. I mean, it was pretty broad-based, Latin America. So that's working well. I've said Alinity is -- it's a multiyear kind of cycle. If you look at these contracts there, 7 to 10 years. So every year, you got 15% that's coming up for renewal. I've also said we're trying to strike the balance between top line growth and gross margin and gross margin expansion. And I think this is the range that we feel is the right range. We can probably accelerate that more with more placements of instruments and more capital, but you have some friction on your gross margin as you do that. So we're being thought about how we make these placements and how we expand. The -- one of the areas that recovered really nicely, and I talked about in the opening comments, was on blood banks. As you know, we're a market leader over here. So as the blood bank business and as people come back to doing blood donations and plasma donations, we disproportionately benefit from that, not only here in the U.S. and around the world. So our big focus here is really to look at the assays and the tests that are missing on the menus and focus the R&D spend to be able to close those gaps. And that was one of the areas that we did during COVID was while one portion of the diagnostic business is working on the COVID testing, the other group was receiving investment to be able to develop new assays to be able to layer on. And that, Marie, is extremely -- it's a very important strategic driver for us because you've got the capital that's been placed out in the instrument, so we could add more assays to that. That comes with a much higher margin profile. So that's our key area of focus. Molecular is an area of focus. We've been working on expanding the menu in Molecular also. And then Point of Care. One of the most exciting assays that the team has developed for Point of Care is a rapid test for traumatic brain injury, sulfur concussion testing. We've got it approved on a plasma sample. We're doing all the work to be able to get it on a whole blood sample, which can then go through a clear waiver test. And then ultimately, you've got now a handheld 15-minute test, blood test, to be able to rule out a concussion that could be -- you can imagine the applications of that kind of test around the world, but specifically a lot in terms of this country. So that's a lot of our focus in Diagnostics.

Our next question comes from Matt Miksic from Barclays.

I have one clarification on some of the topics that came up earlier, and then just hopefully one of the kind of pipeline questions. So one of the things going on in CGM and wearables, as you talked about, Robert, and just to kind of separate these out so we can understand exactly how this will play together maybe over the next 18, 24 months: Libre 3, Lingo and sort of -- and ketone. So Lingo, you mentioned filing at the end of the year. Wondering if that's still ketones and lactates for that product? And then if there's a path forward that includes ketones for kind of the core CGM Libre 3? And then I have 1 just quick pipeline question, if I could.

Sure. Yes, the Lingo product that was launched yesterday, it was really starting off with a glucose-only component to it. We had a lot of debate about this, and we wanted to start off simple. The opportunity to add ketones to that is definitely in the mix, Matt. There's going to be a lot of learning here for us as we, like I say, market a product to a healthy population. And there's going to be a lot of learnings about that. But the idea, as I've laid out at CES a couple of years ago, is that we'll have a pipeline of different analytes that will come into this. Lactate is on the menu also. The team has figured that out. There is an interesting application for lactate, both in the consumer market, but also in the institutional market for continuous lactate monitoring. So bottom line, Lingo is -- it starts with glucose. And then we'll be adding on different analytes as we go learning through that. But all of those opportunities are all there. And I actually think that there's going to be an opportunity, as I've said, with ketones in the diabetes space, for sure. And that dual sensor with ketones-glucose is very strong for a specific diabetes population, but I also think it could be strong for a nondiabetes population also.

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

Yes. Listen, the CSI, it closed this quarter. Thank you for asking that. I think it's going to really have a strong impact as we look at our vascular business and really focus on the growth in the peripheral. You can see that we've strategically been adding, either organically with our below-the-knee stent that we're working on that's currently in trial, and then all the inorganic moves that we've been making. So that's very clear, and we're super excited about having the CSI portfolio at Abbott. Yes, and you highlighted one of the ones that, as we're looking at it, that we were super excited about, and the IVL product. I'll put it this way, as we look and do a lot of the integration efforts, and we did a lot of that in St. Jude, and we learned a lot, I would say, from an R&D and portfolio perspective, as part of that integration exercise, that's one that gets probably a disproportionate amount of attention and share of mind from us as we're doing the integration and as we're looking at the program and thinking about would the program benefit with additional resources, et cetera. So I'm not prepared to comment on that right now, Matt. But rest assured that this one is high on my priority list as we're going through these next kind of quarters here of integration.

Operator, we'll take one more question, please.

Our final question will come from Jayson Bedford from Raymond James.

Maybe just on margins. It looked like there was a nice lift to base business' up margin. And I'm just wondering, is this all related to the improvement in Infant Nutrition? Or are there other factors at work? And then maybe just as a bit of a related question. You talked about the inflationary impacts on gross margin. I think we all understand that. But I'm wondering if you're seeing input costs actually start to come down now? And if so, when will we start to see that impact the P&L?

Sure. Regarding the op margin profile, we're actually back to our pre-pandemic op margin profile. So that's -- I think that's really positive. Obviously, the mix of how we get there is a little different. We got a little bit less gross margin from some of the points that Bob has raised here. But that op margin profile is really a combination of 2 things. I'd say, we made a lot of investments during COVID. I talked about them. We outlined them over the last couple of years. And as we go into this year, you're seeing this accelerated top line. We're seeing a lot of leverage in the P&L because of those investments, haven't had to make the kind of SG&A or R&D investments to be able to drive this 11.5% or low double-digit top line growth rate. So that's one of the big drivers there. Yes, your question on infant formula, that obviously contributes as the product -- as we're recovering the share and the manufacturing is ramping up again. But it's really a combination of all the areas, right? As the device business grows and grows disproportionately, that has a higher gross margin profile, too. So I'd say it's really across the board on all the businesses. And this is an area of focus that we have. To your question on gross margin, this is our biggest opportunity, I would say, maintaining this kind of growth rate and then looking at areas where we can improve our gross margins. Your point on endpoint costs are true. We are seeing certain input costs come down, certain commodities come down. And if we see that continue throughout -- going into next year, I think we'll have a great opportunity there. One of the things that I wanted to make sure we focused on going into this year was that we had the inventory we needed to be able to capitalize on the opportunities we have from a top line perspective. And if you remember, Jayson, second half of last year, supply chain is really challenged, and we had some challenges, right? And that -- those supply chain challenges had an impact on our top line. So going into this year, we told the team, let's make sure we've got all the inventory we need to capitalize on these opportunities. And one of the ways you do that is you've got to lock in your supply, you've got to lock in your volume, you've got to lock in your price. So as commodities come down and we start to look at our contracts for next year, I think that will be a great opportunity for us as we go through it. So that being said, I'll just wrap up here with a few closing comments. We had a very strong start to the first half of the year. We achieved double-digit organic sales growth on the underlying business. We've done it for 2 quarters in a row now. The growth was broad-based. It's not focused on one specific area or one geographic area, it's across the entire portfolio. And all of the areas have delivered great performance. The pipeline has been highly productive. And I think that's the key for us and for our strategy is to make sure that we're bringing new innovations to the market that can kind of sustain our top line and meet unmet needs for patients. We've raised the organic sales growth and the EPS guidance on the base business. And the EPS guidance on the base business is now forecast, as I said in the beginning, to be about $0.15 higher than our original guidance back in January. So momentum is building. We're well positioned for the second half of the year and heading into next year. So with that, thank you for joining us.

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

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