00:00Yeah, this earnings was a huge sigh of relief for investors.
00:03They went into the call, some headwind risks were in the nutrition segment, and that was
00:13going to be dilutive to the overall growth.
00:15There was also questions about the CGM market, which is their core growth driver, continuous
00:20glucose monitors.
00:21Oh, that's the ICM people's arms.
00:23Yeah, exactly.
00:24It's a little like the size of a quarter on the arm.
00:26Yeah, that's a $10 billion revenue run rate for the company.
00:31There were some concerns that it was decelerating growth from the mid-teens, high teens from
00:37last year to below high single digits this year.
00:41Basically, their results calmed all those nerves.
00:44Nutrition is recovering nicely after they implemented new pricing mechanics into their business model.
00:52The CGM business, you know, growing at 9.5%, kind of slightly below the double digit expectations
01:01that management had.
01:02But overall, you know, it wasn't worse than what was expected.
01:06So we eliminated that worst case scenario.
01:08Okay.
01:08Why was there so much concern?
01:10I think about healthcare, and I think about UnitedHealth in particular, and some of the
01:15issues it's had with Medicare reimbursement and government changes to reimbursement plans
01:20overall.
01:21Is that a concern for a company like Abbott?
01:25It's always going to be an overhang.
01:27And we saw that earlier this week when HCA reported, and they highlighted some headwinds
01:36from ACA-related insurance patients.
01:40We have not seen that yet in the med tech side so far in the second quarter.
01:44J&J talked about stable procedure volumes.
01:48Abbott talked about the same procedure volume stability.
01:51One of the reasons, I think, is that Abbott and J&J, they're focusing on those more high
01:57acuity cases, more, you know, these patients need to be treated regardless of what their
02:03insurance coverage is.
02:04And so the hospitals almost have an obligation to treat those patients where some of those
02:09low acuity cases will be deferred longer term.
02:13I'm looking at the PGO function on the Bloomberg terminal, which shows me kind of where they get
02:18their revenue.
02:19There's a lot of places where they get their revenue.
02:21It's highly diversified.
02:22It is a highly diversified medical device company.
02:25What is the street focus on?
02:27Are there two or three business lines that, yeah, because even with the stock up today,
02:3211%, it's still down 20% year to date.
02:34So what's kind of the investment call here on this name?
02:37Yeah.
02:38So the first one goes back to the CGMs.
02:41That being that, you know, kind of 10 billion revenue run rate.
02:44If you're looking at it being back to that double digit revenue growth, that's going to
02:49be a promising growth driver for them.
02:53That nutrition recovery, because that is still almost 25% of their sales.
02:58If they can get that back to growth, that's going to be a good contributor for them.
03:02And then the newest growth driver actually is the exact science acquisition that they made.
03:06So when you think about, you see those TV commercials for Cologuard, that's exact sciences.
03:12So now Abbott has entered that cancer diagnostic segment.
03:15And that's a business that's, they were expecting it to be mid-teens growth this year
03:21for that cancer diagnostic segment.
03:23And so if they are able to deliver that throughout the full year, they've grown at 13% so far
03:29in the first half.
03:31That will be accretive to kind of their six and a half to seven and a half growth guidance.
03:35Is there any talk about M&A when it comes to Abbott, whether it's maybe going to divest
03:42some businesses so that can get a higher share price, or, you know, maybe even add on because
03:47it has done a pretty good job with diversification?
03:51Yeah, let's, I'll start with the add-ons first.
03:52So that exact science deal closed early in the first quarter.
03:57And so that was a $23 billion deal.
04:00That, they have to digest that deal.
04:02They have to integrate it.
04:03They raised $20 billion in debt.
04:05So they have, they have the free cash flow to just pay down that debt.
04:08That's the first step.
04:10Divestitures, I mean, there's always, because they're so diverse, there are some, you know,
04:14probably differentiated features like nutrition that could be able to potentially divest in
04:18the future.
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