ABBOTT LABORATORIES ABT

Abbott is actively managing the impact of new tariff policies, which are estimated to cost a few hundred million dollars in 2025 (half-year impact) and will largely affect gross margin. The company is leveraging its global manufacturing network of 90 sites and decades of experience to implement both short-term and long-term mitigation strategies. While short-term measures include utilizing balance sheet flexibility and considering FX, interest rates, and tax levers, the primary focus is on sustainable, long-term optimization of the manufacturing network to reduce ongoing tariff exposure, rather than relying solely on inventory builds.

Diagnostics sales declined 5% overall, primarily due to a weaker COVID-19 testing season and the impact of Volume-Based Procurement (VBP) programs in China. Excluding China, Core Laboratory sales grew 6.5%, with strong performance in the U.S. (7%), EMEA (7%), and Latin America (mid-teens). The VBP in China presented a unique challenge with price hits but no volume offset. Abbott is expanding its transfusion diagnostic business with a new Alinity m system for molecular nucleic acid testing, targeting a $1 billion market opportunity, and views diagnostics as critical to healthcare, with 70% of decisions involving diagnostic tests.

The EP franchise grew 10%, with double-digit growth in the U.S. and high single-digit growth internationally. Abbott recently obtained CE Mark for its Volt PFA system ahead of schedule and has initiated its European launch, with further expansion planned throughout the year. Management is bullish on Volt's integration with existing mapping capabilities, its balloon feature for PVI, and strong clinical data. U.S. approval for Volt is anticipated in early 2026, with data submission planned for 2025. The company also completed enrollment for its FOCALFLEX trial for CE Mark, combining RF and PFA on the TactiFlex catheter.

Structural Heart sales grew 15%, driven by strong performance across surgical valves, structural interventions, and transcatheter repair/replacement products. Navitor is performing well, and Abbott is gaining share in TAVR, with significant opportunity for U.S. expansion as it is currently in only 25% of implanting hospitals. TriClip continues its strong launch, expected to annualize at around $0.25 billion, benefiting from excellent safety data and new 2-year TRILUMINATE trial data showing significant reduction in heart failure-related hospitalizations. A next-generation TriClip is also in development to enhance ease of use.

Rhythm Management grew 6%, primarily driven by the Aveir leadless pacemaker. Management believes Aveir is an underappreciated opportunity that will fundamentally change the standard of care in pacing, with the majority of the market becoming leadless in the next five years. The rollout has focused on building a strong foundation, increasing accounts by 50%, trained physicians by 50%, and more than doubling daily implants. Early adopters have shown a 30% increase in monthly implants. Abbott is also investing in next-generation Aveir products, including one with 25% increased battery life and a leadless conduction system pacing product with FDA breakthrough designation, targeting a pivotal trial in 2026.

Abbott's Medical Devices segment continues to benefit from a robust pipeline. The company initiated a U.S. pivotal trial for its coronary intravascular lithotripsy (IVL) system, targeting a $1 billion market for severe calcification, with enrollment expected to complete next year and FDA filing shortly after. In Neuromodulation, the TRANSCEND clinical trial for deep brain stimulation (DBS) to treat resistant depression has begun, addressing a market opportunity exceeding $1 billion. These new products are expected to be meaningful growth drivers for their respective businesses.