ABBOTT LABORATORIES

Abbott Laboratories operates in the global healthcare industry, discovering, developing, manufacturing, and selling a broad and diversified line of healthcare products. The company's business is subject to comprehensive government regulation by the U.S. Food and Drug Administration and similar international agencies, and it faces intense competition from other healthcare and pharmaceutical companies. Cost containment efforts by governments and private organizations, as well as changes in the healthcare regulatory environment, are key structural forces shaping competition. Abbott sits within this landscape as a diversified healthcare company with four reportable segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices.

Abbott's products face intense competition from competitors' products and technological advances, with competitors' products potentially being safer, more effective, or having lower prices. The company's competitive advantages include patent and trademark protection, technological and performance features, and inclusion of its products under contracts. In the Established Pharmaceutical Products segment, competition is generally from other healthcare and pharmaceutical companies, including the substitution of generic drugs. In the Diagnostic Products segment, competition is based on technological innovation, price, and convenience of use, with some products subject to rapid obsolescence. In the Nutritional Products segment, competition is from other diversified consumer and healthcare manufacturers, with a significant aspect being the search for ingredient innovations. In the Medical Devices segment, competition is based on technological innovation, price, and product performance, with some products subject to rapid obsolescence.

Abbott generates revenue primarily from the sale of a broad line of healthcare products under short-term receivable arrangements. The company's products are sold directly to retailers, wholesalers, distributors, hospitals, healthcare facilities, laboratories, physicians' offices, and government agencies worldwide. Recurring revenue streams are significant, particularly in the Diagnostic Products segment through the sale of reagents and consumables, and in the Medical Devices segment through continuous glucose monitoring sensors and remote monitoring services. Transactional income comes from the sale of capital equipment and other one-time product sales. The company's four reportable segments are Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices.

The Established Pharmaceutical Products segment includes a broad line of branded generic pharmaceuticals marketed and sold outside the United States in emerging markets, with principal products in gastroenterology (including Creon for pancreatic exocrine insufficiency), women's health (including Duphaston and Femoston), cardiovascular and metabolic (including Lipanthyl, TriCor, and Synthroid), pain and central nervous system (including Serc and Brufen), respiratory drugs and vaccines (including Klacid and Influvac), and biologic products including biosimilars. The Diagnostic Products segment includes core laboratory and transfusion medicine systems (including the Alinity family of instruments), molecular diagnostics PCR systems (including Alinity m and m2000), point-of-care systems (including i-STAT and i-STAT Alinity), rapid diagnostics lateral flow testing products (including BinaxNOW and Panbio), and informatics and automation solutions. The Nutritional Products segment includes pediatric nutritionals (including Similac infant formula and PediaSure) and adult nutritionals (including Ensure and Glucerna). The Medical Devices segment includes rhythm management products (including Aveir leadless pacemakers and Gallant ICDs), electrophysiology products (including the Volt Pulsed Field Ablation System and TactiFlex ablation catheters), heart failure products (including HeartMate LVAD and CardioMEMS HF System), vascular products (including XIENCE drug-eluting stents and Perclose ProGlide vessel closure devices), structural heart products (including MitraClip and TriClip), continuous glucose monitoring systems under the FreeStyle Libre brand, and neuromodulation products (including Proclaim Plus and Eterna IPGs).

In the Medical Devices segment, sales of Abbott's continuous glucose monitoring (CGM) systems totaled $7.6 billion ¹ in 2025 and $6.4 billion ² in 2024. In the Diagnostic Products segment, COVID-19 testing-related sales totaled $297 million ³ in 2025, $747 million ⁴ in 2024, and $1.6 billion ⁵ in 2023. In the Nutritional Products segment, U.S. Pediatric Nutritionals sales were $2,158 million ⁶ in 2025 and $2,208 million ⁷ in 2024, while International Adult Nutritionals sales were $3,029 million ⁸ in 2025 and $2,909 million ⁹ in 2024. In the Established Pharmaceutical Products segment, Key Emerging Markets sales were $4,167 million ¹⁰ in 2025 and $3,858 million ¹¹ in 2024. In the Medical Devices segment, Diabetes Care sales were $7,998 million ¹² in 2025 and $6,805 million ¹³ in 2024, and Rhythm Management sales were $2,649 million ¹⁴ in 2025 and $2,390 million ¹⁵ in 2024.

On November 19, 2025, Abbott entered into a definitive agreement to acquire Exact Sciences Corporation, with Abbott to pay $105 ¹⁶ per common share in cash, representing a total equity value of approximately $21 billion ¹⁷ and an estimated enterprise value of $23 billion ¹⁸. Abbott obtained a commitment for a 364-day senior unsecured bridge term loan facility for an amount not to exceed $20.0 billion ¹⁹ in conjunction with this acquisition. In 2025, Abbott repurchased 4.8 million ²⁰ of its common shares for $604 million ²¹, and as of December 31, 2025, $6.7 billion ²² remains available for repurchase under the 2024 repurchase program. Abbott declared dividends of $2.40 ²³ per share in 2025 and $2.24 ²⁴ per share in 2024, an increase of 7.1 percent ²⁵. In December 2025, Abbott increased the quarterly dividend by 6.8 percent ²⁶ to $0.63 ²⁷ per share. Abbott recorded restructuring charges of $274 million ²⁸ in 2025 related to plans to streamline operations. On September 15, 2025, Abbott repaid the $500 million ²⁹ outstanding principal amount of its 3.875% Notes upon maturity, and on March 17, 2025, Abbott repaid the $1.0 billion ³⁰ outstanding principal amount of its 2.95% Notes upon maturity.

Total net sales for 2025 were $44,328 million ³¹, compared to $41,950 million ³² in 2024 and $40,109 million ³³ in 2023. Net earnings were $6,524 million ³⁴ in 2025, $13,402 million ³⁵ in 2024, and $5,723 million ³⁶ in 2023. Diluted earnings per common share were $3.72 ³⁷ in 2025, $7.64 ³⁸ in 2024, and $3.26 ³⁹ in 2023. Operating earnings were $8,053 million ⁴⁰ in 2025, $6,825 million ⁴¹ in 2024, and $6,478 million ⁴² in 2023. The operating margin profile increased to 18.2 percent ⁴³ in 2025 from 16.3 percent ⁴⁴ in 2024 and 16.2 percent ⁴⁵ in 2023. Net cash from operating activities amounted to $9.6 billion ⁴⁶ in 2025, $8.6 billion ⁴⁷ in 2024, and $7.3 billion ⁴⁸ in 2023.

The filing states that in 2026, Abbott will continue to invest in product development areas that provide the opportunity for strong sustainable growth over the next several years, and that research and development spending is targeted at approximately 7 percent ⁴⁹ of total Abbott sales in 2026.

In the Medical Devices segment, Abbott will focus on growing recently launched products and expanding its market position across its various businesses. Key product approvals in 2025 included U.S. FDA approval and CE Mark for the Volt Pulsed Field Ablation System to treat patients with atrial fibrillation, FDA approval of the Tendyne transcatheter mitral valve replacement system, regulatory approval in Japan for TriClip, CE Mark for TactiFlex Duo Ablation Catheter, and CE Mark for an expanded indication for the Navitor TAVI system. In the Diabetes Care business, Abbott is developing enhancements, additional indications, and tools for continuous monitoring products to help with the management of diabetes, as well as to expand use beyond diabetes. In the Established Pharmaceutical Products segment, Abbott will continue to focus on growing the depth and breadth of its portfolio in emerging markets, including expanding its biosimilars portfolio, and plans to expand its product portfolio in key therapeutic areas and biosimilars with the aim of addressing the health needs of more people in emerging markets.

In the Diagnostic Products segment, Abbott will focus on driving sales growth from its Alinity suite of diagnostic instruments, including expanded menu offerings and GLP track integration, as well as its portfolio of rapid diagnostic testing systems, and growing digital health solutions. The pending acquisition of Exact Sciences Corporation is expected to enable Abbott to enter the cancer diagnostics market. In the Nutritional Products segment, Abbott will focus on introducing new products to adapt to evolving consumer preferences and driving growth globally, with research and development spend focused on platforms spanning pediatric and adult nutrition areas including gastrointestinal/immunity health, brain health, mobility and metabolism, and user experience platforms.

The operating margin profile increased to 18.2 percent ⁵⁰ in 2025 from 16.3 percent ⁵¹ in 2024, reflecting the favorable impact of margin improvement initiatives, partially offset by foreign exchange and inflation. Gross profit margins were 52.6 percent ⁵² of net sales in 2025, 50.9 percent ⁵³ of net sales in 2024, and 50.3 percent ⁵⁴ of net sales in 2023. The increase in 2025 reflects the favorable impact of margin improvement initiatives, partially offset by higher costs, including tariffs, and the unfavorable impact of foreign exchange. In 2025, Abbott management approved plans to streamline certain operations in order to reduce costs and improve efficiencies in its Diagnostics, Nutritionals, Established Pharmaceuticals, and Medical Devices businesses, recording employee related severance and other charges of $274 million ⁵⁵.

Abbott expects to contribute approximately $85 million ⁵⁶ to its pension plans in 2026. Abbott expects annual cash flow from operating activities to continue to exceed Abbott's capital expenditures and cash dividends. Capital expenditures of $2.2 billion ⁵⁷ in 2025 were principally for upgrading and expanding manufacturing and research and development facilities and equipment in various segments, investments in information technology, and laboratory instruments placed with customers.

Research and development expenses were $2.9 billion ⁵⁸ in 2025, $2.8 billion ⁵⁹ in 2024, and $2.7 billion ⁶⁰ in 2023. Abbott plans to manage its portfolio of projects to achieve research and development spending that will be competitive in each of the businesses in which it participates, and such spending is targeted at approximately 7 percent ⁶¹ of total Abbott sales in 2026. Capital expenditures were $2.2 billion ⁶² in 2025, 2024, and 2023. As of December 31, 2025, $6.7 billion ⁶³ remains available for repurchase under the 2024 repurchase program. Abbott declared dividends of $2.40 ⁶⁴ per share in 2025 compared to $2.24 ⁶⁵ per share in 2024, an increase of 7.1 percent ⁶⁶. In December 2025, Abbott increased the company's quarterly dividend by 6.8 percent ⁶⁷ to $0.63 ⁶⁸ per share from $0.59 ⁶⁹ per share.

Sales in international markets comprise 61 percent ⁷⁰ of consolidated net sales, and Abbott's business is subject to geopolitical and macroeconomic risks including the enactment of trade protection measures such as tariffs, import or export licensing requirements, and changes to international trade agreements. The U.S. government has imposed tariffs on imports into the U.S., and it may impose additional tariffs in the future, with some countries potentially retaliating with trade protection measures including reciprocal tariffs. Fluctuation in foreign currency exchange rates has adversely affected and may continue to adversely affect Abbott's financial statements, with sales outside of the U.S. in 2025 making up approximately 61 percent ⁷¹ of Abbott's net sales. The ongoing Russia-Ukraine conflict has resulted in sanctions, economic and currency volatility, higher inflation, heightened cybersecurity risks, and operational and supply chain disruptions.

Abbott's operations in Russia and Ukraine represent approximately 2 percent ⁷² of Abbott's total revenues and net assets. Abbott's sales growth in 2025 was impacted by the decline in COVID-19 testing-related sales in the Diagnostics segment, with COVID-19 testing-related sales totaling $297 million ⁷³ in 2025, $747 million ⁷⁴ in 2024, and $1.6 billion ⁷⁵ in 2023. In the Diagnostics segment, sales were also affected by challenging market conditions in China, including the impact of volume-based procurement programs. In the Nutritional Products segment, U.S. Pediatric Nutritionals sales decreased 2.3 percent ⁷⁶ in 2025, primarily reflecting lower infant formula sales.

Abbott faces material risks from its pending acquisition of Exact Sciences, as it plans to fund the transaction with approximately $20 billion ⁷⁷ of borrowings, which will increase consolidated indebtedness from approximately $12.9 billion ⁷⁸ as of December 31, 2025, and could reduce business flexibility and potentially cause a deterioration of credit ratings. The company is subject to significant legal and regulatory risks, including a criminal investigation by the United States Department of Justice related to Abbott's manufacturing of powdered infant formula, and numerous lawsuits alleging that its preterm infant formula products cause necrotizing enterocolitis, with a jury in a Missouri state court awarding a plaintiff $495 million ⁷⁹ in damages in one case. Abbott's business is also exposed to geopolitical and macroeconomic risks, as sales outside of the U.S. make up approximately 61 percent ⁸⁰ of net sales, and the company faces potential adverse effects from tariffs, trade protection measures, and foreign currency exchange rate fluctuations. Additionally, Abbott's research and development efforts to develop commercially successful products may not succeed, and the company must make ongoing substantial expenditures without assurance of commercial success, with research and development expenses of $2.9 billion ⁸¹ in 2025.

Management's message emphasizes that Abbott's sales growth in 2025 was primarily attributable to the performance of the Medical Devices and Established Pharmaceutical Products segments, with results reflecting continued progress across related research and development programs, including the contribution of new and recently introduced products and indication expansions. The filing states that in 2026, Abbott will continue to invest in product development areas that provide the opportunity for strong sustainable growth over the next several years. The strategic priorities emphasized for the period ahead include: in the diagnostics businesses, focusing on driving sales growth from its Alinity suite of diagnostic instruments, including expanded menu offerings and GLP track integration, as well as its portfolio of rapid diagnostic testing systems, and growing digital health solutions; in the medical devices businesses, focusing on growing recently launched products and expanding its market position across its various businesses; in the nutrition businesses, focusing on introducing new products to adapt to evolving consumer preferences and driving growth globally; and in the established pharmaceuticals businesses, continuing to focus on growing the depth and breadth of its portfolio in emerging markets, including expanding its biosimilars portfolio. Management also notes that research and development spending is targeted at approximately 7 percent ⁸² of total Abbott sales in 2026.