2nd UPDATE: Abbott Labs 1Q Net Up 53% On JV Gain Despite Weak Sales
April 15 2009 - 11:47AM
Dow Jones News
Abbott Laboratories (ABT) posted a 53% jump in first-quarter
profit, boosted by a gain related to a terminated joint venture
that helped offset disappointing sales.
But shares of the Abbott Park, Ill., medical-products company
dropped to their lowest level since 2006 after revenue fell short
of Wall Street expectations, with a marked slowdown in sales growth
for the blockbuster anti-inflammatory drug Humira that had been a
driver of Abbott's success in recent years. Unfavorable
currency-exchange rates and inventory reductions hurt sales.
Abbott scaled back its forecast for full-year 2009 Humira sales
growth, now calling for growth of 15% to 20% from a previous
projection of more than 25%. Humira sales grew 47.6% last year to
$4.5 billion. The reduced view seemed to confirm some investors'
fears that prescription growth was slowing down - fears that have
contributed to a 20% year-to-date decline in Abbott's previously
high-flying stock price.
The weak economy hurt Abbott's results. An increasing percentage
of U.S. patients aren't refilling prescriptions, Abbott Chief
Executive Miles White told analysts. He also cited rising copays
and other changes in drug-benefit plans that are hurting drug
sales.
Until recently, Abbott shares had been outperforming most other
drug makers because its diversified business model provided some
protection from forces that were hurting companies more heavily
concentrated in pharmaceuticals. But recently some analysts have
begun to question Abbott's prospects, citing concerns about future
growth of Humira and Abbott's cholesterol-related drugs.
Credit Suisse analyst Catherine Arnold said the reduced forecast
for Humira "suggests the product's growth may be starting to slow."
Humira competes with Enbrel from Amgen Inc. (AMGN) and Wyeth (WYE),
and Remicade from Johnson & Johnson (JNJ) and Schering-Plough
Corp. (SGP).
White, expressing annoyance at the market reaction to the news,
said Humira still had strong prospects and would add several
billion dollars in sales in coming years.
Abbott shares fell $2.10, or 4.7%, to $42.63 recently.
Abbott said net income for the three months ended March 31 rose
to $1.44 billion, or 92 cents a share, from $938 million, or 60
cents a share, a year earlier. The latest quarter included a gain
of $505 million, or 32 cents a share, for the "derecognition" of a
contingent liability that was recorded in connection with last
year's conclusion of a joint venture with Takeda Pharmaceutical Co.
(4502.TO), plus other one-time items. Excluding these, earnings
were 73 cents a share, or 3 cents ahead of the mean estimate of
analysts surveyed by Thomson Reuters.
First-quarter sales were off 0.7% at $6.72 billion, below
analyst expectations of $7.06 billion, according to a survey by
Thomson Reuters.
Abbott's feat of exceeding earnings expectations despite missing
revenue expectations was similar to what its larger rival, J&J,
reported Tuesday in its first-quarter results. Many drug and
medical-product companies have been cutting costs to bolster the
bottom line amid pressure on the top line, although Abbott's total
first-quarter operating costs and expenses did increase slightly
from a year earlier.
Abbott's biggest unit, pharmaceuticals, posted a sales decline
of 5.7% to $3.64 billion, with negative currency rates more than
offsetting a slight operational sales gain.
Sales of Humira, which treats rheumatoid arthritis and other
conditions, rose 16.7% to $1 billion. Abbott said unfavorable
currency rates reduced non-U.S. sales growth by about 20 percentage
points, worse than expected. Sales of anti-HIV drug Kaletra dropped
17% to $292 million, while sales of anti-seizure drug Depakote
plunged 64.5% following its exposure to generic competition last
year.
Abbott's nutritional sales, which include Similac baby formula,
rose 6.4% to $1.18 billion. Diagnostics sales declined 1.8% to $816
million.
Abbott's vascular sales jumped 43% to $645 million, helped by
Abbott's coronary stent devices, including the new Xience
drug-coated stents. Coronary stent sales more than doubled to $402
million.
Despite its recent challenges, Abbott reiterated its forecast of
full-year 2009 earnings of $3.65 to $3.70 a share. For the second
quarter, Abbott expects earnings of 87 cents to 89 cents a share,
excluding certain items.
Analysts expect earnings of 88 cents a share for the second
quarter and $3.67 a share for full-year 2009.
White played down the notion that Abbott would have to
significantly change its strategy in coming years. He also insisted
Abbott didn't "compete" to acquire Wyeth, which agreed in January
to be bought by Pfizer Inc. (PFE) in a deal originally valued at
$68 billion.
Abbott was reportedly the "Company X" cited in Pfizer and Wyeth
regulatory filings as having had preliminary talks with Wyeth in
December for a potential takeover, before deciding not to pursue
it. White said Wednesday Abbott isn't evaluating any large
acquisitions, and didn't need such large deals to achieve its
financial and strategic objectives.
-By Peter Loftus, Dow Jones Newswires; 215-656-8289;
peter.loftus@dowjones.com
(Mike Barris and Jon Kamp contributed to this report.)