Good morning, and thank you for standing by. Welcome to Abbott's second quarter 2022 earnings conference call. All participants will be able to listen only until the question and answer portion of this call. During the question and answer session, you will be able to ask your question by pressing the star one keys on your touchtone phone. 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. Scott Leinenweber, Vice President, Investor Relations, Licensing, and Acquisitions.
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 2022. Abbott cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Economic, competitive, governmental, technological, and other factors that may affect Abbott's operations are discussed in Item 1A, Risk Factors, to our annual report on Form 10-K for the year ended December 31st, 2021.
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 excludes the impact of foreign exchange. With that, I will now turn the call over to Robert.
Thanks, Scott. Good morning, everyone, and thanks for joining us. Today, we reported results of another strong quarter. Earnings per share were $0.43, reflecting more than 20% growth compared to last year. Sales increased nearly 14.5% on an organic basis in the quarter, led by growth in Established Pharmaceuticals, Diagnostics, and Medical Devices. Based on our performance through the first six months, we increased our earnings per share guidance to at least $4.90 for the full year. This speaks to the strength and resilience of our diversified healthcare model as well as strong execution in this challenging macro environment. We've continued to advance our R&D pipeline and strengthen our long-term growth platforms with several new product approvals. Our supply chain has remained resilient, and our financial health remains strong.
I'll now summarize our second quarter results in more detail before turning the call over to Bob. I'll start with Established Pharmaceuticals or EPD, where sales increased more than 9% in the quarter. Strong performance this quarter was led by double-digit growth across several countries, including China, Brazil, Colombia, Mexico, and Vietnam. EPD continues to execute and perform at a very high level in a dynamic environment, achieving double-digit organic sales growth over the past year and a half, including more than 11% organic growth through the first half of this year. Moving to Diagnostics, where sales grew over 35% in the quarter. COVID test sales were $2.3 billion in the quarter, more than 95% of which came from rapid tests, including BinaxNOW in the U.S., Panbio internationally, and ID NOW globally.
As we had predicted some time ago, rapid testing has become widely accepted and has proven to be a very important tool in combating the virus due to its affordability and accessibility, including at-home testing. While vaccines have been shown to play an important role in reducing severity of outcomes, with the emergence of new variants that escape immunity, rapid tests have become the best tool we have to help people quickly and easily identify new cases and quarantine to help slow and prevent transmission. As you know, forecasting COVID testing demand beyond the near term has been challenging. As such, our forecast for the next few months contemplates a modest approaching endemic-like amount of testing sales.
We are in regular discussions with governments around the world, including the U.S., for surveillance testing needs and to ensure capacity is available and ready if we see another surge this winter. If that were to happen, we have a lot of manufacturing capacity in the U.S. and internationally to help meet testing needs. I'll now turn to Nutrition, where, as you know, we initiated a voluntary recall in February of certain infant formula products manufactured at one of our U.S. facilities. Earlier this month, we resumed partial production at that facility, starting with our specialty formula EleCare and metabolic formulas. We are in the final phases of testing to restart Similac production. As a reminder, once we begin production, it takes several weeks for product to reach store shelves.
That said, we will do everything possible to accelerate delivery of product to retailers so families can have access to the formula they need as soon as possible. We've already started to see some share recovery at retail over the past couple of months as we leveraged our global manufacturing network to increase supply to the U.S., including importing product from our FDA-registered plant in Ireland. We also began importing product from Spain after receiving enforcement discretion from the FDA that expanded the allowance for imports. As I said in April, it's important to note that the results of the investigation from the FDA, CDC, and Abbott concluded no evidence linked our formulas to any infant illnesses or deaths, and there is no new information to suggest otherwise. We take this matter very seriously, and we're making a number of enhancements to our operations at the impacted manufacturing plant.
We're also taking steps across our manufacturing network to expand capacity and redundancy. We're committed to set the standard in industry on quality and safety and to re-earn the trust of the families that depend on us. Across our broader Nutrition business, global sales in adult nutrition increased 5% in the quarter, including more than 7.5% growth internationally, led by our market-leading Ensure and Glucerna brands. Lastly, I'll wrap up with Medical Devices, where sales grew 7.5% in the quarter. In Cardiovascular Devices, sales growth was led by structural heart and heart failure.
While cardiovascular procedure trends continued to improve, growth in the quarter was somewhat more modest than what we had anticipated back in April due to several factors, most notably healthcare staffing challenges, COVID surges and lockdowns in China that were implemented as part of their efforts to control the spread of the virus. We expect these dynamics to improve in the second half of the year. In Diabetes Care, sales of FreeStyle Libre grew more than 25% on an organic basis in the quarter, and our user base now exceeds 4 million users globally. During the quarter, we continued to strengthen our Medical Device portfolio with innovative new products, most notably U.S. FDA clearance of our FreeStyle Libre three continuous glucose monitoring system, which is the world's smallest and thinnest wearable glucose sensor that provides results with the highest level of accuracy in the industry.
U.S. approval of Aveir, our leadless pacemaker for the management of slow heart rhythms. Aveir was specifically designed to be retrievable if the device ever needs to be removed and expandable to a dual-chamber device, which is currently under development, if the therapy needs evolve over time. In summary, our diversified healthcare model continues to prove highly resilient in a dynamic macro environment. We're achieving strong growth across several areas of the portfolio and making good progress restarting our nutrition manufacturing facility. As a result of our strong performance through the first six months, we're raising our EPS guidance for the year. 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, which excludes the impact of foreign exchange. Turning to our results. Sales for the second quarter increased 14.3% on an organic basis, which was led by strong growth in Diagnostics, Established Pharmaceuticals, and Medical Devices, along with global COVID testing-related sales of $2.3 billion in the quarter. During the second quarter, sales were negatively impacted by a voluntary recall and manufacturing shutdown in February of certain infant formula products manufactured at one of our U.S. plants. Excluding COVID testing-related sales and the U.S. sales associated with the recalled products, Abbott's sales increased 6.2% on an organic basis in the second quarter. Foreign exchange had an unfavorable year-over-year impact of 4.2% on second quarter sales.
During the quarter, we saw the U.S. dollar continue to strengthen versus several currencies, which resulted in a 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 56.7% of sales, which reflects the impacts of the recent nutrition recall and incremental inflation we saw in certain manufacturing and distribution costs in the quarter. Adjusted R&D investment was 5.8% of sales and adjusted SG&A investment was 24.4% of sales in the second quarter. Lastly, our second quarter adjusted tax rate was 14.5%.
Turning to our outlook for the full year 2022, we forecast total company organic sales growth, excluding the impact of COVID testing related sales, to be in the mid- to high-single digits. It is important to note, excluding products impacted by the nutrition recall, we forecast total organic sales growth in the high-single digits for the remainder of our combined businesses, which includes Medical Devices, Established Pharmaceuticals, Diagnostics excluding COVID testing related sales, and areas of Nutrition not impacted by the recall. We forecast COVID testing related sales of $6.1 billion, which includes year-to-date sales through June of $5.6 billion and projected sales of approximately $500 million over the next few months. We will continue to update our COVID testing related sales forecast one quarter at a time as appropriate.
Lastly, based on current rates, we would now expect exchange to have an unfavorable impact of approximately 5% on our full year reported sales. With that, we'll now open the call for questions.
Thank you. If you have a question at this time, please press the star, then the number one key on your touchtone telephone. For optimal sound quality, we kindly ask that you please use your handset instead of your speakerphone when asking your question. Again, that's star, then one to ask a question. Our first question will come from Robbie Marcus from JP Morgan. Your line is now open.
Great. Thanks for taking the question. Congrats on a good quarter. Robert, maybe to start, maybe I'll get a little greedy here since we're only sitting in July and half of 2022 is done. I think the focus for investors is quickly shifting to next year. There's a lot of moving pieces going on in 2022, a lot of assumptions we have to make in the go forward of 2023. Where's COVID testing? How fast does Nutrition come back? And how steady can the Device business be going forward? You know, there's a lot of uncertainty out there of where numbers should sit and, you know, how to start thinking about the business for next year. Any thoughts you have at this point would be really helpful.
Sure. Well, I think there's a lot of uncertainty for everybody regarding 2023. I think you've kind of highlighted some of the aspects as it relates to our business here. But the macro environment still is pretty challenging, and I don't think it's unique to us. Obviously, there's significant inflation, and seems like there's a pretty significant. I call like a commodity super cycle for us. There's healthcare staffing challenges. You hear about that. And then obviously a strong U.S. dollar. So all those kind of combinations are the challenges that a lot of companies are going to face. If you look at a lot of the financial and consumer indicators, retail, housing, auto, et cetera, you know, those tend to point towards an increased risk of recession.
What I would say is historically, in that macro environment, healthcare has proven to be pretty resilient. Whether it's the durability of these essential procedures and products, I mean, you can only defer them somewhat. A large portion of the healthcare spend is government funded. We've got a diversified model that's proved itself to be very resilient in this kind of environment. At a macro level, I think those are the headwinds that, you know, we're all facing and we'll all be facing. You mentioned COVID as a factor here. You know, it's interesting. Last year this time, we were talking about how COVID would, you know, COVID testing would move away.
We've actually shipped just as many tests in the first six months of this year compared to all of last year. I think that we're going to need to see how the cases evolve, Robbie, especially during you know, the winter and fall months over here. Obviously, I don't think it's prudent to forecast a winter surge, but like I said, we've got capacity to be able to deal with that. Those are some of the key factors here that we're looking at. Nutrition, that you mentioned, we're recovering pretty nicely, I would say, versus where we originally thought we were going to be back in April. A lot of focus on restarting the manufacturing site.
We've recovered already a good portion of the share that we lost. Obviously, we continue to see that moving forward positively. On the flip side, though, what I would say is that we're not gonna just sit still over the next couple of months and wait for these macro kind of factors here to play out, right? We're taking a very proactive approach on the elements that we can control and that we can impact. We're taking price where we can, and we've seen that in our consumer-based businesses. These are businesses because of the strength of our brands that we've been able to do that, and pass it on.
We're also looking at other areas that, you know, we can or that historically, we haven't necessarily looked at in terms of price. We're looking at our cost structure. I've talked about this in previous calls too, and we've got a program in place now where we're looking at our cost structure. The hurdles in terms of investment have obviously increased given this macro environment. We're not gonna put any risk to our long-term growth platforms, but we're definitely looking at our cost structure and see where we can improve. Inventory is important as we move into this inflationary period here. We're ensuring that we've got the right amount of inventory. I put all that together, Robbie. We've got macro headwinds that everybody else has regarding Nutrition.
I think our performance is well aligned to where we planned and where I see us ending up end of the year is ultimately where our forecast, well, the forecast that we laid out. COVID testing is one that to simply assume that there won't be any COVID testing next year, we've never believed that. The question is just your ability to forecast beyond, you know, three to six months. That's the challenge. Fundamentally, I think our businesses remain very strong. We've got leading positions in attractive long-term growth markets, strong pipeline, and I'm sure we'll talk about some of that today also. Got a lot of ongoing upcoming launch activity, and a strong balance sheet that provides us a lot of strategic and financial flexibility.
It's difficult to pin a number on it right now, Robbie, but, you know, at a high level, those are the elements that we're working with, and ultimately like to see some of these elements play out over the next couple of months here.
Great. Maybe just as a follow-up to that, Robert, you were talking about the cost structure at Abbott, and this is something we're hearing from basically everyone that in inflation, supply chain, et cetera. You know, you're in this enviable position where you've probably grown operating margins more than anyone else in med tech since the start of COVID. A lot of that has been from the benefit of COVID testing sales, which are at healthy margins and still healthy reinvestment against that. You know, as we think about your operating margins going forward and you reevaluating your cost base here, you know, it's a difficult question, and it's been a while for med tech investors to see anything but just margins going straight up.
How do you want investors to start thinking about where your base operating margin is, maybe potentially if COVID testing sales slow down in the future?
Yeah. I always appreciate you like to get at the next year's number in a couple different ways, Robbie. I guess I would say on the cost structure piece, I don't necessarily fully agree with you that the way you characterize it in terms of COVID being the, you know, the ultimate driver here. I think we made a lot of progress on our gross margins, historically, whether it was, you know, in Devices, and in Nutrition. As the Device business continues to grow, that profile of that business is accretive. You know, you've seen our growth rates in that business over these last couple of years, so that helps the margin.
You know, our biggest challenge, I would say, from a gross margin perspective is really on the inflation side. Yeah, we're seeing input costs go up, you know, probably more on the commodity side. You know, impacting EPD, impacting Nutrition, less so in you know, I would say in Device and Diagnostics. Yeah, there's some, you know, some noise that happens here with one supplier or another supplier, and we deal with it. You know, the real challenge we've had, I would say over the last kind of six months here has been on the Nutrition side. Part of that is, you know, some of it is commodities.
We're gonna have to see how those look like over the next kind of couple of months. Seeing some slowing down of some commodities, but that's the biggest kind of driver there. The other part of the Nutrition is, I would say, costs that I don't anticipate to be there next year. For example, we're paying WIC rebates for competitive products since April, actually since March when we initiated the recall. As we restart production in the facility, I don't assume that that will continue. I made statements in my opening comments about bringing product in from overseas. We brought a lot of formula from overseas, and that's all air freight.
You know the story on freight and distribution. Once that facility starts up and running, I don't anticipate to see those same kind of freight expenses from overseas shipments. We put some money towards brand recovery and, you know, I think that was an investment that's necessary to get our share back in the position that we need as we go into next year. That being said, as I said, we're gonna look at our cost structure. We're gonna look at areas that you know have a higher hurdle now for passing an investment hypothesis or thesis. We're gonna, you know, we'll take action where we need to take action. That's how I characterize our margin.
Great. I appreciate the thoughts. Thanks a lot.
Thanks.
Thank you. Our next question comes from Joshua Jennings from Cowen. Your line is now open, sir.
Hi. Good morning. Thanks for taking the questions. I was hoping to start with a follow-up on the raise of the 2022 EPS guidance floor and just better understand the puts and takes. I think there are some questions around the $0.30 beat in 2Q and the $0.20 increase. Again, realizing that it is a floor, but it seems like a lot of that, kind of, I guess, $0.10 delta is driven by the move in the U.S. dollar in July. But just wanted to better understand the puts and takes and how you guys arrived at the increase that you did. I have one follow-up.
Sure. Yeah, I think you'll see. I mean, we've seen a lot of companies kind of beat their Q2 and either maintain their guidance for the full year or actually reduce it. You know, we looked at our numbers very carefully, and we basically looked at the strength of our base business. If you exclude infant nutrition, the parts of the Nutrition business that was recalled, we're growing high single digits, and we continue to see that kind of growth rate going forward. Between the strength of the base business and the COVID sales, we then felt that we had enough power here to navigate and push through some of these macro headwinds that are pretty significant, right?
You know, inflation is a big element there. We had some costs when we gave initial guidance in January. We increased that in our April call, and we've assumed another $200 million of inflation since that number that we provided in April. So that's one element that we're absorbing, I guess. What I would call healthcare staffing challenges, COVID cancellations, you know, the lockdown issues that we saw in Q2, especially, I'd say, on our core lab business and EPD in China, for example, you know, those are being absorbed also.
Currency, as you referenced, you know, pretty dramatic strengthening here of the U.S. dollar. So we've assumed all of that. You know, as I said also to Robbie, we've had to factor in some additional costs on the nutrition side, whether it's the WIC rebates, the freight and distribution, some of the investments we're making to support share recovery. You put those two together, those two elements together on the macro, on the nutrition side, and then you offset that with our base business and COVID sales, and that's really the element there, Josh. As you said, you know, since the beginning of the pandemic, we've gone to at least floor-like guidance here, and that's what $4.90 is. It's a floor right now.
Could that be better? Yeah, it could. There could be elements that could make that number be better. You know, on top of absorbing all these incremental headwinds here, inflation, currency, making some of the investments we need on nutrition, we're still able to raise our full year guidance.
Well, thanks, Robert. Just one follow-up on the Medical Devices business, and it's encouraging to hear you talk about kind of improvement in the back half, and you did have that tough comp in 2Q. Are you able to just share any high-level color just on elective procedure trends throughout the quarter in 2Q, just a month-over-month improvement that you see? And then anything you can share on color in July. Just wondering, you called out a couple of the headwinds that you saw in 2Q for hospitals and the challenges that they're facing to accelerate elective procedure volumes in the second half. What do you think the biggest challenge is, and do you think the hospitals are well equipped to overcome those? Thanks. Thanks again for taking the questions.
Yeah, sure. I think you mentioned there, I mean, Q2 last year was a pretty significant revenue for a lot in med tech. There is that comp aspect there. Second quarter procedures and volumes, if I look at Abbott's procedure volumes and sales, they're actually higher than pre-pandemic levels, and there was sequential growth from Q2 to Q1 over 7% in the U.S. and a little bit lower internationally. The aspect here is that we are seeing growth, but it was a little bit more modest than what we had anticipated back in April, right? I think there's really three factors there.
One of them, as I said, in the U.S. specifically, I think the staffing challenges were a factor there. As people tested positive, while they didn't have to go to the hospital and they could just stay at home, you know, that had an impact on some of the procedures that there's a little bit more planning towards. The good news is we know what those procedures are, we know where they are, and you know, we've got an opportunity to follow up on them, you know, like we did last year, and following up on all the procedures that got pushed out. Internationally, I think you saw some similar headwinds there, but I think the biggest headwind for us was China.
The lockdowns that occurred there. Then the third factor for us was, you know, we had some back order, and that was really due to the timing of input material availability. You know, in terms of when you receive you know the materials to build the product. Now we are building inventory. I don't anticipate that to be the case going forward in the second half. Those are really the facts, you know, that you know had our Device business a little bit more modest than what we projected in April. I think those, you know, get better.
We've got launch activity, so and I'm sure we'll talk about some of those also, products that we've launched that will gain in momentum in the second half. In talking to a lot of the U.S. systems, you know, they've just got to figure out better how to staff and to do more planning. That might involve maybe looking at having more procedures booked because you know that there's a certain amount of cancellations that will happen. I think that, you know, that will get better also as the hospitals understand these dynamics.
I'm excited about the Device portfolio, in terms of the second half, not only because of some of these issues, which I think will get better, but also because of our pipeline and the products we're launching and the execution.
Great. Thanks again.
Thank you. Our next question will come from Larry Biegelsen from Wells Fargo, and your line is now open.
Good morning, guys. Robert, can you hear me okay?
Yeah, I can, Larry.
Yeah, it cut out a little bit. So two for me. Thanks for taking the question. I wanted to start with Libre. Robert, just a multi-part question here on Libre, another nice quarter. Any, you know, how should we think about the Libre three launch in the U.S.? Should we expect it to be kind of a gradual rollout like we saw with Libre 2? And how are you feeling about, you know, resolving the vitamin C interaction issue? It sounds like you guys have made some good progress there. Just lastly, international was a little softer than we expected. Is this just kind of a law of large numbers or, you know, is this just a timing issue in terms of, you know, the full rollout of Libre 3? I did have one follow-up.
I think Libre 3, we're very excited. We've had very good success in Germany in terms of upgrading the base and then with the benefits of Libre 3 actually seeing some conversions from competitive systems. The U.S. launch is gonna be exciting for the U.S. team. It'll be the only CGM with a sub-8% margin, and that launch process is underway. You know, it is a little bit more gradual. We're gonna work to get onto pharmacy contracts, PBM contracts, managed care contracts, et cetera. We're building inventory. We're familiarizing the physicians with the product. Given what I've seen in Europe, I think this is a great opportunity for our U.S. business, which by the way did really well this quarter, right?
Even without Libre 3. We grew 53% in the second quarter. I actually think that we can maintain that 30%-40% growth rate in the U.S. even without Libre 3. I think that's gonna be an important growth driver for us towards the end of the year and as we go into 2023. I do think, Larry, that, you know, CGM is a little different. I mean, we have it in Devices, but the model is, at least in the U.S., is very pharma-like. You know, where patient out-of-pocket, co-insurance, co-pays, contracts, et cetera, they play a big role. Understanding those and the interdependencies of those are very important.
I think in an environment where employers and consumers are gonna be looking more closely at managing their expenses, I think the value proposition of Libre is gonna be even stronger. Regarding your question on vitamin C fix, yes, we have done the work to be able to address that. We've made very good progress. I'm gonna provide further updates over time. You know, obviously this relates only to the U.S. We're actually gonna be launching an AID system in Europe with our partners in Europe in Q4 with Libre 2. You'll get more updates on that.
I think that the exciting piece on the pump connectivity, though, is what we announced in June at the ADA with a dual sensor, a glucose ketone sensor, that's under development. It's received breakthrough designation from the FDA. The scientific advisors that I've spoken to, both in the U.S., international, believe that this is going to become the go-to sensor for pump connectivity, and just because of the ability to bring in the ketone measurement and perfect even more those algorithms. I think this is gonna be an ideal sensor for existing pump companies and even for new pump manufacturers. Regarding your question on international, you know, there's a little bit of timing there, I would say.
Well, it's two parts, a little bit of timing from in Germany as we convert to Libre 3 and the mechanisms in place there. Then there was some FX, you know, headwind that you know impacted you know a lot of our international businesses. Did I cover it all for you, Larry?
That was very comprehensive. Really appreciate it.
Okay.
Just for my follow-up, Robert, I know I've asked this a lot on recent calls, but you're sitting on a lot of cash and, you know, we have seen a recent, you know, rerating evaluations. Are you starting to see more opportunities? Any color on deal size that you're looking at? I think some investors, you know, are saying, you know, when COVID testing comes down, you know, you might have a gap, you know, in terms of earnings that you need to fill. How important is it to find an accretive deal to offset potential, you know, decline in COVID testing? Thanks.
Well, on the COVID testing side, I mean, I guess we'll have to kind of see how things play out right now. I mean, I guess that was the same comment last year. As I said, we're probably selling more, well we sold more in the first six months here versus last year. Regarding your comment though on the M&A side, yeah, I don't think anything's really changed there. I mean, obviously, valuations have obviously come down somewhat, and we've got the capacity, as you said, in our balance sheet and that flexibility. But the microenvironment is, you know, just because the valuations come down, I mean, it's challenging and dynamic for all the companies, even the ones that have seen these valuations come significantly down.
I think while we do have cash, I still think we need to be strategically and financially disciplined here to be mindful of when we're assessing these potential targets. You know, have they gotten to the right point given some of these macro environments that are gonna be playing out? I think the market needs to stabilize for a period of time here, Larry, before I think a lot of management teams and their boards become a little more comfortable with the reset of their valuations and their financial outlooks.
That being said, yeah, I'd say the level of study, the level of review, the level of analysis on potential targets has definitely increased over the past, you know, four or five months here. I've been clear about the areas that, you know, we're looking at and the kind of types of transactions we would be interested of. It always goes back to, does it make sense strategically and does it make sense financially?
All right. Thanks for that.
Nothing's changed there.
Thanks for taking the questions.
Thank you. Our next question will come from Joanne Wuensch from Citi, and your line is now open.
Good morning, and thank you for taking the questions. I'm gonna put them all up front. Some questions regarding your structural heart franchise. Could you give us sort of a state of the union or update on where you are on some key products, MitraClip, Portico, and Amulet? Just as a follow-up to the previous question, could you remind us where you are on share repurchases and your view towards if you're not using the cash for M&A, what you will be using the cash for? Thank you.
Sure. On the Structural Heart Side, I talked about how this is such an important division for us and the focus that we've had there. I'd say on Amulet, we've had a very good quarter on Amulet, aligned to the trends that we're hoping for. We've got an expansion of the amount of accounts that are using the product, and also an expansion on the amount of implanters that are completing and performing this procedure. You know, one of the challenges we had in the beginning, Joanne, was just really to get the implanters trained. We needed proctors and, as you remember, in November, December, January, and February, there was a lot of challenge with travel.
That's actually looking really nice in terms of the ramp there. What I'm very encouraged about is the traction we're seeing from the early adopters. Some of those that began the training and implanting in Q4 of last year, their utilization is more than double that of the average user. We're seeing both things in terms of driving the sales there, the increase of new accounts and then the increase in productivity and utilization of the existing implanters. On the Portico side or on the TAVR side, you know, sales have been strong, especially in Europe, where we've introduced Navitor, which is our next-generation TAVR system.
It's a competitive device from a clinical profile in high-risk patients. We estimate right now that we're about a high single digit. But when we look at the centers that are using Navitor, and Navitor is probably in about 40-45% of the centers in Europe, shares in the mid-teens. That's very encouraging also, because Navitor being our second product has really been an improvement for Portico. As you know, we filed that in the US in October of last year. It's a PMA. I expect that to be the case. I expect to see an approval, an opportunity for us to launch into the TAVR market here in the U.S.
On MitraClip, you know, this was a tough comp for us this quarter. You know, last quarter and last year, it was the highest quarter we've ever had in terms of procedures, in terms of sales. There's no doubt that this one here is probably a little bit more impacted by COVID and some of the healthcare staffing challenges and the rescheduling of procedures. I expect these dynamics to steadily improve over time. As I said previously, I don't think we've fully benefited yet from the indication expansion that we received for the functional MR. The market still remains pretty under-penetrated, and there's a lot of opportunity for growth there. A lot of activity in our structural heart business, a lot of good performance. I just expect that to get better over the next couple of quarters. Then what was your other question?
It had to do with share repurchases, use of cash if you're not using it for M&A. Thank you.
Oh, sure. Well, listen, we've always kind of had a balanced approach for deploying our cash. We're mindful of our cash on hand. We're investing in the dividend and we've been growing that dividend. That's an important part of it. We're investing in the capacity expansions in several areas, Libre, electrophysiology, MitraClip, Nutrition. You know, we bought back shares in the first half of the year and something that we'll continue to assess as we go through the second half here. The approach towards our capital allocation is pretty balanced. You know, we're committed to the dividend. We've done some share buybacks in the first half. We'll continue to assess in the second half. There's great opportunities for us to continue to invest organically, to be able to drive the organic part of the business.
Thank you.
Thank you. Our next question will come from Vijay Kumar from Evercore ISI. Your line is open.
Hi, Robert. Thanks for taking my question. Congrats on a strong 2Q here. One on this guidance here. You know, when we look at the base floor for fiscal 2024, you guys did close to $3.15 of earnings in first half. The implied earnings for back half is the floor of $1.74. That's annualizing to about $3.50-ish. Is there, I guess, that $1.74-ish for back half, that's below the back half of 2019. I'm wondering between FX inflation, is there something else that's going on here where, you know, we still have COVID revenues, you know, flowing through in the back half? It seems a little light on the EPS guidance.
Hey, Vijay, this is Bob. I'll take that call, question. You know, I think using an implied kind of fourth quarter exit rate as an indicator, kind of how we're thinking about 2023, you know, probably wouldn't be prudent at this point. There's obviously a lot going on in the macro environment that warrants further monitoring and assessment. On top of that, there are a couple of swing factors that are specific to us. Strength of our COVID testing business, you know, that's provided us an awful lot of flexibility to reinvest back into our P&L the last couple of years. You know, as Robert kind of talked about, we'll see kind of how COVID testing plays out. We continue to see very strong demand.
There's some element of that that we fully expect to stick around. It's just difficult to pinpoint what that level is at this point in the year. As part of our budgeting process for next year, we'll take a close look at the overall cost structure, which Robert touched on, and our investment priorities. As you know, we're also working through the nutrition recall and making good progress incrementally investing. Robert talked about the fact that some of those investments will modulate over time or even go away. That combined with recapturing share, we'll see the earnings power of that business ramp up over time. You know, finally, our pipeline has been highly productive and especially in Devices.
As we drive that growth, that's accretive growth overall to the corporation. You know, those are big moving parts. As we start to think about 2023, we'll incorporate all those elements active and especially in Devices. As we drive that growth, that's accretive growth overall to the corporation. You know, those are big moving parts. As we start to think about 2023, we'll incorporate all those elements in our forecast next year.
I guess I'll just add to that, Vijay also. I mean, you know, when we talk about the strength of the U.S. dollar and the impact that we're having on a full year basis, it's pretty significant. A big portion of that impact is actually forecasted to happen in the second half of this year. That also plays a role together with the inflation aspects that we're facing. That's really the challenge.
That's helpful. Maybe one last one. With the second half, a base business guidance, mid-single digit to high single digits. If I look at 2Q ex- China and ex- nutrition at base business did north of 7%, which is in line with the high single sort of trajectory that investors have baked in. With the back half of mid-single to high single-
Like I said, I think we've got opportunity here on the back half also. We've set a floor. Again, I'll just reiterate that this is where contemplating all these puts and takes that we've been discussing, we feel confident in that floor number. We believe that, you know, there's opportunities here for you know for upside to that.
Hey, Vijay, I would just say, as Bob said in his prepared remarks, excluding Nutrition, we expect high single digits for the remainder of the businesses, to your point. The math you're doing there is right.
That's helpful, Scott. The guide is assuming some impact here in the back half. That's helpful. Thanks, guys.
Thank you. Our next question will come from Travis Steed from Bank of America. Your line is now open.
Hi, good morning. Can you hear me okay?
Yes.
All right, great. Just wanted to ask a couple more on the margin puts and takes. I know it responds to Robbie's question. You mentioned a lot of, like, one-time costs and Nutrition WIC contracts on top of inflation and FX. So just wanted to think about the commitment and ability to grow operating margin, you know, off this year's base margins, you know, if the macro environment just remains stable. I assume most of those nutrition and one-time investments go away later this year as nutrition ramps up, back up. But I don't know if there's any other levers that you can pull in the margin line and also not sure about this year's FX headwinds, how much of those naturally carry over into next year. That's something that J&J kind of flagged for people.
Yeah. Listen, the commitment to grow the operating margin is always there. We always shoot for that growth. You know, you had a big if there, and that's the big if, right? You know, if the conditions remain the same. I don't know what currency is gonna look like next year. Bob can talk about that a little bit. You know, there are some of these costs, but I mentioned that, you know, I don't anticipate having to, you know, fly in the amount of formula that we flew in from overseas. I don't anticipate having to kinda pay those WIC rebates on competitive product.
We have a what I would call a steady investment profile on our Nutrition business that, you know, I would say we're a little bit out of profile in the next, you know, quarter or so because we want to make sure that as product coming back that we can work to regain our share. You know, we've seen some of that share regain over the last couple of months. I mean, from the start of the recall, we lost about half of our IMF share. Of that half that we lost over the last couple of months, we've regained half of that back. Some of these costs, like I said, are more one-time in nature. On the FX side, I don't know if Bob, if you have a comment on that.
Well, I guess I'd say history has taught us that rates rarely, if ever, hold for a long period of time. Trying to pinpoint kind of an accurate projection for next year at this point is pretty challenging. There's an awful lot of moving parts, as you know. Different central banks taking different rate actions, different strengths of economies, et cetera. You know, that said, at a high level, you know, based upon kinda where we're at today, a decent portion of the impact we're seeing this year will carry into next year. Obviously, there's a long way to go, so we need to see how things play out. As part of our planning process, you know, we always look for opportunities to mitigate currency impacts as best we can.
No, thank you for the additional color. That's helpful. I did wanna make sure I heard you right. It sounds like you're gonna launch an AID infusion system in Europe with Libre 2 by Q4. I don't know if you'd be willing to say, like, who that partner is or what that product might look like in any form or fashion.
Yeah. I think we made an announcement about the partnership several, you know, about a month and a half ago. Yeah, that's with Ypsomed, a local European manufacturer and another partner. Our target is to be able to launch that by the end of the year in Europe.
Okay. No, great. Thanks a lot for the questions.
Operator, we'll take one more question.
Thank you. Our last question will come from Jayson Bedford from Raymond James, and your line is now open.
Hi. Good morning, and thanks for taking the questions. Just a couple. First, on the infant nutrition and the manufacturing ramp here, is there any way to frame where you are today and when you feel like you'll be back to full production levels? Obviously, I'm just thinking in the context of where you were last year and potential profit recapture in this segment.
Sure. Well, as I said, we restarted in July 1st, and we began production of the specialty formulas. The production of the Similac, which is called our core base formula, I mean, we're very close to that, Jason, is what I would say. I don't wanna necessarily kinda put an exact date here, but we're not talking months, you know, we're not talking weeks. We're very close there. We obviously have a team that's ready to go and to ramp up. We know that we're gonna have to work hard to shorten time between manufacturing and on-shelf availability. There's a team that's specifically dedicated to working on accelerating that timeframe also. I like where we're at. We'll continue to use our global network to be able to augment those efforts of share recapture.
Robert, when we look at 2023 for USP, is the debate just around market share? I'm assuming from a manufacturing standpoint, you should be pretty clean in 2023.
Yeah. That's our expectation. I think the debate on 2023 is predominantly market share, and then there might be a little bit of market also in terms of understanding, you know, how much of, you know, the growth in today's market is inventory build. We have seen an increase in birth rates, so that's another opportunity also for to maybe offset that. But yeah, I think it's mostly about market share, market share recovery and like I said in the previous question, I think we've done pretty well about using our network to be able to regain the market share that we had lost in those first couple of months.
Yeah, it's really about looking at our share and share recovery, which is why, you know, as I said, we've made some investments during, you know, over the next, you know, three, four, five months here to be able to put us in that right position in 2023. I just close the call here. Obviously, you know, a lot of your questions show that there is, I guess some uncertainty in the environment. It's pretty dynamic, and I think that's gonna be the same for a lot of companies. For Abbott specifically, our new product launches are performing very well. Our R&D pipeline is strong, and as I said, our financial health is also strong.
We're making progress in Nutrition to drive share recovery, and our adult business and international growth opportunities still remain very strong. The cardiovascular device portfolio. There is growth. It continues to recover, albeit not at the same level that we had forecasted back in April, but I do expect that same recovery trend. It's not as linear as we would like or as what we've historically had. Ultimately, I do believe that the segment will continue to grow and recover. EPD and Libre continue to perform very well.
In Diagnostics, I get that COVID testing is a big portion of the equation here, but you know, I just remind ourselves of where we were last year and what we thought was gonna happen last year. Right now, all the data shows that, you know, testing is still here. Cases are up. Our test sales are actually up. Our tests have done very well from a brand and you know, become somewhat of a preferred format over here. As I look to the second half of the year, I anticipate, you know, some of the macro challenges to continue in some cases to be tough. In other cases, you know, hopefully we'll see some easing on there.
Our diversification is very unique, and that's what's held up very well. We're navigating the macro headwinds. We're investing in our growth platforms and we raised our guidance for the full year, and I think that's a rarity in this environment, and I think it speaks to the strength of the portfolio and the execution and our ability to manage and leverage the portfolio. With that, we'll wrap up, and thank you for joining us today.
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 11:00 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, and you may now disconnect. Everyone, have a wonderful day.