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Overseas Results Boost Abbott

Apr 16, 2008 | JOHN FLOWERS | The Wall Street Journal

Abbott Laboratories' first-quarter net income rose 34% amid fewer charges and strong international results, thanks in part to the weak U.S. dollar.

The company also announced Japanese approval of its Humira drug to treat arthritis there.

The pharmaceutical and medical-products company recorded net income of $937.9 million, or 60 cents a share, compared to $697.5 million, or 45 cents a share, a year ago. Excluding items such as acquisition costs, earnings rose to 63 cents from 55 cents. Abbott in January predicted a range of 61 cents to 63 cents, below Wall Street's then-expectations.

Revenue increased 14% to $6.77 billion.

Analysts' latest mean estimates for earnings per share and revenue were 62 cents and $6.53 billion, respectively, according to Thomson Financial. Gross margin dipped to 56.2% from 56.4%

Chairman and Chief Executive Miles D. White, noting five new product approvals for the quarter, said, "The continued productivity of our late-stage pipeline, combined with the underlying strength of our broad mix of businesses, gives us a high level of confidence in our future growth outlook."

All of Abbott's divisions, with the exception of its small domestic vascular unit, posted sales gains where international sales, helped by the weak U.S. dollar, dwarfed domestic growth. The company noted that domestic revenue, which rose 3.7%, were hurt by generic competition starting in May for Omnicef.

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Abbott's largest division, pharmaceuticals, saw sales rise 14% to $3.85 billion. Sales for its best-selling anti-inflammatory drug Humira were up 54% to $878 million. Separately, the company announced that Humira had been approved for sale in Japan for the treatment of rheumatoid arthritis in patients with inadequate response to conventional therapy.

Sales at its nutritional product unit, which markets meal replacement shake Ensure, rose 11% to $1.11 billion.

Abbott is looking to sales of its new drug-coated stent Xience, which is expected to be approved by the Food and Drug Administration during the second quarter, for its next hit. However, the company will enter an already crowded market, with Johnson & Johnson, Boston Scientific Corp. and Medtronic Inc. already well-positioned. The drug-coated stent market looks to be on the rebound after recent studies suggested that newer devices no longer carry an increased chance of blood clots versus non-coated stents.

Otherwise, the company is like many big pharmaceuticals, trying to stem the entry date of generic competition for its most valued drugs. On occasion those methods have been testing legal limits as to how patent law should account for small changes in drug formulations. Abbott, for instance, is facing a lawsuit brought by 18 states, alleging it blocked generic competition for its blockbuster anti-cholesterol TriCor medication.

Also during the quarter, Abbott and Takeda Pharmaceutical Co. will end their 31-year-old joint venture. Abbott will take with it the rights to oncology treatment Lupron as well as a portion of any sales from drugs currently sold or in the pipeline.

Looking ahead, Abbott forecasted second-quarter earnings excluding items of 78 cents to 80 cents a share. Analysts expected 79 cents. It also reiterated its January outlook for 2008 earnings excluding items between $3.20 and $3.25 a share.