Abbott Laboratories’ first-quarter profit met Wall Street expectations on better-than-expected sales of its drug Humira, though the company lowered its profit outlook due to the impact of the health care overhaul.
The maker of drugs and medical devices said it will take a write-down tied to changes in retiree prescription drug coverage included in the health care reform law enacted last month.
Abbott lowered its 2010 earnings expectation by 7 cents to between $4.13 and $4.18 per share, excluding one-time items. Wall Street expects $4.23 per share.
Analyst were encouraged by the company’s guidance, which they said appeared stronger than other companies facing health reform headwinds.
“In our view, Abbott’s guidance reflects stronger-than-expected growth of the underlying business, enabling the company to absorb some of the health care reform impact and still deliver” double-digit growth, said Leerink Swann analyst Rick Wise in a note to clients.
Johnson & Johnson, Eli Lilly and a number of other major corporations have already reported similar charges. Under the new law, which aims to cover millions of uninsured people, businesses will be prohibited from writing off a federal subsidy that covers part of the cost of retiree prescription drug coverage.
Adding to the pressure on drugmakers is a new requirement to give larger Medicaid rebates to low-income patients. Abbott said the requirement reduced sales by about $60 million for the quarter.
The North Chicago, Ill., company reported earnings of $1 billion, or 64 cents per share, in the three months that ended March 31. That’s down from the $1.44 billion, or 92 cents per share, in the same period last year due to a $505 million gain from Abbott’s joint venture with Takeda Pharmaceuticals.
Revenue grew 15 percent to $7.7 billion. Sales of the biotech drug Humira, an injection for inflammatory diseases, climbed more than 36 percent to $1.4 billion, beating analyst expectations.
Excluding one-time items, the company earned 81 cents per share.
Analysts polled by Thomson Reuters forecast a profit of 80 cents per share on revenue of $7.73 billion. Analysts typically exclude one-time items from their estimates.
Pharmaceutical and vascular product sales, including drug-coated stents, increased 13 percent and 16 percent, respectively. Stents are mesh-wire tubes used to prop open arteries after they have been cleared of fatty plaque.
International pharmaceutical sales increased 14 percent thanks to the recently closed acquisition of Belgian Solvay Pharmaceuticals. The company said it expects the unit to add $3 billion in sales this year.
Abbott spent much of the past year acquiring small to medium-size drug and device companies, including contact lens solution maker Advanced Medical Optics and Evalve, a maker of heart repair equipment.
That buying spree was primarily aimed at diversifying the company’s revenue stream beyond Humira, which will lose U.S. patent protection in 2017.
On a call with analysts, Chief Financial Officer Thomas Freyman suggested the company would make fewer, smaller purchases in the year ahead.
“It’s important to take a breath and be sure that the assets we’ve acquired are going to perform at the level we need them to,” Freyman said. “If we were to do anything more it would tend to be around augmentation of our pharma pipeline, which I would characterize as tuck-ins.”
Abbott shares fell $1.28, or 2.4 percent, to $51.78 in late afternoon trading.
Date: April 21, 2010
Source: Associated Press