Abbott Reports Strong Third Quarter Results; Confirms Double-Digit Ongoing Earnings Outlook for 2010
By Abbott, PRNETuesday, October 19, 2010
Third Quarter Ongoing EPS Growth of 14.1 Percent -
ABBOTT PARK, Illinois, October 20, 2010 - Abbott (NYSE: ABT) today announced financial results for the third
quarter ended Sept. 30, 2010.
- Diluted earnings per share, excluding specified items, were
US$1.05, reflecting 14.1 percent growth, at the high end of Abbott's
previously issued guidance range of US$1.03 to US$1.05. Diluted
earnings per share under Generally Accepted Accounting Principles
(GAAP) were US$0.57, primarily reflecting costs associated with
recently announced restructuring actions for the integration of the
Solvay Pharmaceuticals acquisition.
- Worldwide sales increased 11.8 percent to US$8.7 billion,
including an unfavorable 1.0 percent effect of foreign exchange rates.
Growth in the quarter was driven by worldwide pharmaceutical sales,
which increased 21.7 percent, including the contribution from the
Solvay acquisition, as well as worldwide vascular products sales, which
increased 18.6 percent.
- Third quarter results included strong investment spending,
particularly in R&D, as well as an improvement in adjusted gross margin
ratio to 61.6 percent.
- Abbott is confirming its 2010 ongoing earnings-per-share guidance
and raising the lower end of its previous guidance range. As a result,
Abbott's ongoing earnings-per-share guidance for full-year 2010 is now
US$4.16 to US$4.18, excluding specified items.
"Abbott delivered strong performance in the quarter as we confirmed our
double-digit growth outlook for the full year," said Miles D. White, chairman
and chief executive officer, Abbott. "During the quarter, we announced an
agreement to expand our pharmaceutical pipeline with an attractive late-stage
asset for the treatment of chronic kidney disease, which follows the addition
of several novel compounds earlier this year. In addition, we completed the
acquisition of Piramal's Healthcare Solutions business and finalized the
integration planning for the Solvay Pharmaceuticals acquisition. The
strategic actions we've taken across our global businesses position us well
in high-growth emerging markets as well as promising new therapeutic areas."
The following is a summary of third-quarter 2010 sales.
(All amounts in U.S. dollars unless otherwise specified)
Quarter Ended 9/30/10
(dollars in millions)
% Change vs. 3Q09
-----------------
Foreign
Sales Reported Exchange Operational
----- -------- -------- -----------
Total Sales $8,675 11.8 (1.0) 12.8
Total
International
Sales $4,813 16.2 (2.0) 18.2
Total U.S. Sales $3,862 6.6 -- 6.6
Worldwide
Pharmaceutical
Sales $4,937 21.7 (a) (1.6) 23.3
International
Pharmaceuticals $2,674 29.7 (a) (3.2) 32.9
U.S.
Pharmaceuticals $2,263 13.5 (a) -- 13.5
Worldwide
Nutritional Sales $1,365 (1.5) (b) 0.8 (2.3)
International
Nutritionals $739 1.9 1.5 0.4
U.S. Nutritionals $626 (5.3) (b) -- (5.3)
Worldwide
Diagnostics Sales $916 0.8 (1.4) 2.2
International
Diagnostics $664 (1.7) (1.9) 0.2
U.S. Diagnostics $252 8.2 -- 8.2
Worldwide Vascular
Sales $790 18.6 (0.9) 19.5
International
Vascular $378 39.7 (2.3) 42.0
U.S. Vascular $412 4.2 -- 4.2
Other Sales $667 (10.6) (1.0) (9.6)
Note: See "Consolidated Statement of Earnings" for more information.
(a) Includes impact from the acquisition of Solvay Pharmaceuticals,
which closed on Feb. 15, 2010.
(b) Includes impact from a nutritional product recall announced in
September 2010.
The following is a summary of nine months ended September 2010 sales.
Nine Months Ended 9/30/10
(dollars in millions) % Change vs. 9M09
-----------------
Foreign
Sales Reported Exchange Operational
----- -------- -------- -----------
Total Sales $25,199 14.7 1.8 12.9
Total International Sales $14,293 21.2 3.4 17.8
Total U.S. Sales $10,906 7.1 -- 7.1
Worldwide Pharmaceutical
Sales $13,955 19.9 (a) 1.8 18.1
International
Pharmaceuticals $7,866 27.6 (a) 3.3 24.3
U.S. Pharmaceuticals $6,089 11.2 (a) -- 11.2
Worldwide Nutritional
Sales $4,099 6.4 (b) 2.0 4.4
International
Nutritionals $2,152 12.4 4.1 8.3
U.S. Nutritionals $1,947 0.6 (b) -- 0.6
Worldwide Diagnostics
Sales $2,779 6.8 2.4 4.4
International Diagnostics $2,045 6.9 3.3 3.6
U.S. Diagnostics $734 6.3 -- 6.3
Worldwide Vascular Sales $2,372 20.5 1.5 19.0
International Vascular $1,110 41.6 3.8 37.8
U.S. Vascular $1,262 6.5 -- 6.5
Other Sales $1,994 4.1 1.1 3.0
Note: See "Consolidated Statement of Earnings" for more information.
(a) Includes impact from the acquisition of Solvay Pharmaceuticals,
which closed on Feb. 15, 2010.
(b) Includes impact from a nutritional product recall announced in
September 2010.
The following summarizes global sales for selected products and related
foreign exchange impacts compared to the prior year.
Quarter Ended 9/30/10
(dollars in millions)
Global Sales
% Change vs. 3Q09
-----------------
Global Foreign
Sales Reported Exchange Operational
----- -------- -------- -----------
Pharmaceutical
Products
HUMIRA $1,679 12.6 (3.5) 16.1
TRILIPIX/
TriCor $404 22.1 -- 22.1
Kaletra $328 (7.2) (2.4) (4.8)
Niaspan $225 4.7 -- 4.7
Lupron $189 (3.3) (0.4) (2.9)
Synthroid $143 6.9 1.0 5.9
Nutritional
Products
Pediatric
Nutritionals $679 (9.3) (a) 1.3 (10.6)
Adult
Nutritionals $681 7.8 0.2 7.6
Medical
Products
Core
Laboratory
Diagnostics $753 (1.6) (1.4) (0.2)
Coronary
Stents $505 29.9 0.1 29.8
Diabetes Care $318 0.1 (2.4) 2.5
Medical Optics $254 (3.4) 0.4 (3.8)
Molecular
Diagnostics $95 16.0 (2.8) 18.8
(a) Includes impact from a nutritional product recall announced in
September 2010.
The following is a summary of Abbott's third-quarter 2010 sales for
selected products.
Quarter Ended 9/30/10
(dollars in millions)
U.S.
----
% Change
Sales vs. 3Q09
----- --------
Pharmaceutical
Products
HUMIRA $757 8.1
TRILIPIX/TriCor $341 3.2
Kaletra $87 (23.6)
Niaspan $225 4.7
Lupron $124 (3.8)
Synthroid $118 7.2
Nutritional Products
Pediatric Nutritionals $261 (19.1) (a)
Adult Nutritionals $359 8.2
Medical Products
Core Laboratory
Diagnostics $152 2.9
Coronary Stents $259 6.0
Diabetes Care $134 7.7
Medical Optics $104 8.3
Molecular Diagnostics $47 23.2
(dollars in millions)
International
-------------
% Change vs. 3Q09
-----------------
Foreign
Sales Reported Exchange Operational
----- -------- -------- -----------
Pharmaceutical
Products
HUMIRA $922 16.6 (6.6) 23.2
TRILIPIX/TriCor $63 n/m n/m n/m
Kaletra $241 0.7 (3.6) 4.3
Niaspan -- -- -- --
Lupron $65 (2.4) (1.2) (1.2)
Synthroid $25 5.6 5.7 (0.1)
Nutritional Products
Pediatric Nutritionals $418 (1.9) 2.2 (4.1)
Adult Nutritionals $322 7.3 0.4 6.9
Medical Products
Core Laboratory
Diagnostics $601 (2.7) (1.7) (1.0)
Coronary Stents $246 70.5 0.2 70.3
Diabetes Care $184 (4.7) (4.0) (0.7)
Medical Optics $150 (10.2) 0.7 (10.9)
Molecular Diagnostics $48 9.7 (5.2) 14.9
n/m = Not meaningful
(a) Includes impact from a nutritional product recall announced in
September 2010.
The following summarizes global sales for selected products and related
foreign exchange impacts compared to the prior year.
Nine Months Ended 9/30/10
(dollars in millions)
Global Sales
% Change vs. 9M09
-----------------
Global Foreign
Sales Reported Exchange Operational
----- -------- -------- -----------
Pharmaceutical Products
HUMIRA $4,670 22.1 1.5 20.6
TRILIPIX/TriCor $1,083 17.9 -- 17.9
Kaletra $914 (7.5) 1.1 (8.6)
Niaspan $640 6.6 -- 6.6
Lupron $548 (6.2) 2.0 (8.2)
Synthroid $395 11.6 2.5 9.1
Nutritional Products
Pediatric Nutritionals $2,142 3.9 (a) 2.1 1.8
Adult Nutritionals $1,925 10.3 2.0 8.3
Medical Products
Core Laboratory
Diagnostics $2,308 4.6 2.7 1.9
Coronary Stents $1,493 25.7 2.0 23.7
Diabetes Care $938 3.1 1.8 1.3
Medical Optics $784 36.8 0.9 35.9
Molecular Diagnostics $271 22.4 0.9 21.5
(a) Includes impact from a nutritional product recall announced in
September 2010.
The following is a summary of Abbott's nine months ended September 2010
sales for selected products.
Nine Months Ended 9/30/10
(dollars in millions)
U.S.
----
% Change
Sales vs. 9M09
----- --------
Pharmaceutical Products
HUMIRA $1,996 14.4
TRILIPIX/TriCor $937 2.0
Kaletra $252 (18.6)
Niaspan $640 6.6
Lupron $353 (11.5)
Synthroid $320 9.3
Nutritional Products
Pediatric Nutritionals $905 (4.5) (a)
Adult Nutritionals $1,011 6.9
Medical Products
Core Laboratory
Diagnostics $444 (0.5)
Coronary Stents $799 4.0
Diabetes Care $384 3.3
Medical Optics $304 26.2
Molecular Diagnostics $134 24.4
(dollars in millions) International
-------------
% Change vs. 9M09
-----------------
Foreign
Sales Reported Exchange Operational
----- -------- -------- -----------
Pharmaceutical Products
HUMIRA $2,674 28.5 2.8 25.7
TRILIPIX/TriCor $146 n/m n/m n/m
Kaletra $662 (2.4) 1.6 (4.0)
Niaspan -- -- -- --
Lupron $195 5.2 6.2 (1.0)
Synthroid $75 22.6 14.4 8.2
Nutritional Products
Pediatric Nutritionals $1,237 10.9 3.8 7.1
Adult Nutritionals $914 14.4 4.4 10.0
Medical Products
Core Laboratory
Diagnostics $1,864 5.9 3.4 2.5
Coronary Stents $694 65.4 5.6 59.8
Diabetes Care $554 3.0 3.0 --
Medical Optics $480 44.4 1.5 42.9
Molecular Diagnostics $137 20.5 1.7 18.8
n/m = Not meaningful
(a) Includes impact from a nutritional product recall announced in
September 2010.
Business Highlights
- Completed Acquisition of Piramal's Healthcare Solutions
Business: Completed the acquisition of Piramal's Healthcare Solutions
business, propelling Abbott to market leadership in the Indian
pharmaceutical market and further accelerating the company's growth in
emerging markets. Abbott expects its pharmaceutical sales in India to
exceed $2.5 billion by 2020.
- Announced Agreement to Develop and Commercialize Bardoxolone:
Announced an agreement with Reata Pharmaceuticals to develop and
commercialize bardoxolone methyl for the treatment of chronic kidney
disease (CKD) outside the United States, excluding certain Asian
markets. Bardoxolone is an oral, first-in-class anti-inflammatory
(Nrf2 activator) that works by increasing the estimated glomerular
filtration rate (eGFR) of the kidneys. Early clinical studies suggest
bardoxolone could be a significant improvement to the current standard
of care and possibly prevent patients from progressing to the later
stages of the disease and dialysis. A Phase IIb study was recently
completed and initiation of a global Phase III trial is targeted to
begin in the coming months.
- New Data Presented at the Transcatheter Cardiovascular
Therapeutics (TCT) Meeting: Data presented from key trials at TCT
reinforced the outstanding safety data supporting Abbott's
market-leading XIENCE V(R) Everolimus Eluting Coronary Stent System.
In particular, results from both Abbott's SPIRIT IV trial (XIENCE V
compared to Boston Scientific's TAXUS(R) Express2(TM) drug-eluting
stent) and the investigator-initiated COMPARE trial (XIENCE V compared
to TAXUS(R) Liberte(R)) showed that XIENCE outperformed TAXUS in key
areas of safety and efficacy through two years. Abbott also announced
positive nine-month results from the first 45 patients enrolled in the
second stage of the ABSORB trial, and presented six-month results for
all 101 patients enrolled in the second stage of the bioresorbable
vascular scaffold (BVS) study. Abbott is the only company with
long-term data on a complete patient set evaluating a BVS.
- Received FDA Market Clearance for Next-Generation Contact Lens
Disinfecting Solution: Received U.S. Food and Drug Administration (FDA)
market clearance for RevitaLens Ocutec(TM), a unique next-generation
multi-purpose disinfecting solution for silicone hydrogel and
conventional soft contact lenses. RevitaLens Ocutec Multi-purpose
Disinfecting Solution delivers high-quality disinfection and comfort
for the user, with the convenience of a single bottle.
- Announced FDA Approval for First Automated Molecular Test for
HBV: Announced approval from the FDA to market the Abbott RealTime HBV
assay for measuring viral load or the amount of hepatitis B virus (HBV)
in a patient's blood. It is the only approved test capable of
automating HBV viral load testing from sample extraction to final
results. The Abbott RealTime HBV assay is now available for
laboratories that use the Abbott m2000 automated instrument system for
molecular diagnostic testing.
- Received FDA Approval for New Dosage Strengths of SIMCOR(R):
Received FDA approval for two new dosage strengths of SIMCOR. The new
SIMCOR dosage strengths combine 40 mg of simvastatin - the most
commonly prescribed dose of simvastatin - with either 500 mg or 1,000
mg of niacin extended-release. SIMCOR is the first treatment to
combine Abbott's proprietary niacin extended-release and simvastatin,
the most commonly used statin.
- Submitted Regulatory Applications for Briakinumab (ABT-874):
Submitted applications in the United States and Europe seeking
regulatory approval for Abbott's investigational IL-12/23 biologic for
the treatment of psoriasis.
Abbott confirms double-digit ongoing earnings-per-share growth for 2010
Abbott is confirming its 2010 ongoing earnings-per-share guidance and
raising the lower end of its previous guidance range. As a result, Abbott's
ongoing earnings-per-share guidance for full-year 2010 is now $4.16 to $4.18,
excluding specified items.
Abbott forecasts specified items for the full-year 2010 of approximately
$1.24 per share, primarily associated with acquisition integration, cost
reduction initiatives, a litigation reserve, in-process research and
development, product recall and withdrawal costs, impairment of sibutramine
related intangible asset and the one-time impact of the devaluation of the
Venezuelan bolivar on balance sheet translation. Including these specified
items, projected earnings per share under Generally Accepted Accounting
Principles (GAAP) would be $2.92 to $2.94 for the full-year 2010.
Abbott declares quarterly dividend
On Sept. 16, 2010, the board of directors of Abbott declared the
company's quarterly common dividend of 44 cents per share, an increase of 10
percent over the prior year. The cash dividend is payable Nov. 15, 2010, to
shareholders of record at the close of business on Oct. 15, 2010. This marks
the 347th consecutive dividend paid by Abbott since 1924.
About Abbott
Abbott is a global, broad-based health care company devoted to the
discovery, development, manufacture and marketing of pharmaceuticals and
medical products, including nutritionals, devices and diagnostics. The
company employs nearly 90,000 people and markets its products in more than
130 countries.
Abbott's news releases and other information are available on the
company's Web site at www.abbott.com. Abbott will webcast its live
third-quarter earnings conference call through its Investor Relations Web
site at www.abbottinvestor.com at 8 a.m. Central time today. An archived
edition of the call will be available after 11 a.m. Central time.
- Private Securities Litigation Reform Act of 1995 -
A Caution Concerning Forward-Looking Statements
Some statements in this news release may be forward-looking statements
for purposes of the Private Securities Litigation Reform Act of 1995. 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
Securities and Exchange Commission Form 10-K for the year ended Dec. 31,
2009, in Item 1A, "Risk Factors," to our quarterly report on Securities and
Exchange Commission Form 10-Q for the quarter ended March 31, 2010, and are
incorporated by reference. Abbott undertakes no obligation to release
publicly any revisions to forward-looking statements as a result of
subsequent events or developments.
Abbott Laboratories and Subsidiaries
Consolidated Statement of Earnings
Third Quarter Ended September 30, 2010 and 2009
(in millions, except per share data)
(unaudited)
2010 2009 % Change
---- ---- --------
Net Sales $8,675 $7,761 11.8
------ ------
Cost of products sold 3,742 3,360 11.3
Research and development 1,079 676 59.7
Selling, general and administrative 2,673 2,085 28.2
----- -----
Total Operating Cost and Expenses 7,494 6,121 22.4
----- -----
Operating earnings 1,181 1,640 (28.0)
Net interest expense 133 97 38.8
Net foreign exchange (gain) loss (21) -- n/m
Other (income) expense, net 5 (328) n/m 1)
--- ----
Earnings before taxes 1,064 1,871 (43.1)
Taxes on earnings 173 391 (55.6)
--- ---
Net Earnings $891 $1,480 (39.8)
==== ======
Net Earnings Excluding Specified Items, as
described below $1,632 $1,429 14.1 2)
====== ======
Diluted Earnings per Common Share $0.57 $0.95 (40.0)
===== =====
Diluted Earnings Per Common Share, Excluding
Specified Items,
as described below $1.05 $0.92 14.1 2)
===== =====
Average Number of Common Shares Outstanding
Plus Dilutive
Common Stock Options and Awards 1,554 1,552
1) Other (income) expense, net in 2009 includes a favorable patent
litigation settlement and ongoing contractual payments from Takeda
associated with the conclusion of the TAP joint venture. The patent
litigation settlement has been treated as a specified item and
excluded from ongoing operations.
2) 2010 Net Earnings Excluding Specified Items excludes after-tax
charges of $513 million, or $0.33 per share, associated primarily
with the acquisition of Solvay Pharmaceuticals, including recently
announced restructuring plans, as well as cost reduction
initiatives, $70 million, or $0.05 per share, for costs of a
nutritional product recall and the withdrawal of sibutramine, and
$158 million, or $0.10 per share, for impairment of the intangible
asset related to sibutramine.
2009 Net Earnings Excluding Specified Items excludes an after-tax
Gain of $178 million, or $0.11 per share, relating to a patent
litigation settlement. This was partially offset by after-tax
charges of $127 million, or $0.08 per share, primarily for
integration and cost reduction initiatives.
NOTE: See attached questions and answers section for further explanation
of Consolidated Statement of Earnings line items.
n/m = Percent change is not meaningful.
Abbott Laboratories and Subsidiaries
Consolidated Statement of Earnings
Nine Months Ended September 30, 2010 and 2009
(in millions, except per share data)
(unaudited)
2010 2009 % Change
---- ---- --------
Net Sales $25,199 $21,975 14.7
------- -------
Cost of products sold 10,620 9,425 12.7
Research and development 2,667 1,997 33.6
Acquired in-process research and development 75 -- n/m
Selling, general and administrative 7,579 6,181 22.6
----- -----
Total Operating Cost and Expenses 20,941 17,603 19.0
------ ------
Operating earnings 4,258 4,372 (2.6)
Net interest expense 319 287 10.8
Net foreign exchange (gain) loss 8 29 (71.6)
Other (income) expense, net (14) (1,315) n/m 1)
--- ------
Earnings before taxes 3,945 5,371 (26.5)
Taxes on earnings 760 1,164 (34.7)
--- -----
Net Earnings $3,185 $4,207 (24.3)
====== ======
Net Earnings Excluding Specified Items, as
described below $4,476 $3,960 13.0 2)
====== ======
Diluted Earnings per Common Share $2.04 $2.70 (24.4) 3)
===== =====
Diluted Earnings Per Common Share, Excluding
Specified Items,
as described below $2.87 $2.54 13.0 2)
===== =====
Average Number of Common Shares Outstanding
Plus Dilutive
Common Stock Options and Awards 1,556 1,553
1) Other (income) expense, net, in 2009 includes the
derecognition of a contingent liability and a favorable
patent litigation settlement. These items have been
treated as specified items and excluded from ongoing
operations. 2010 and 2009 also include ongoing
contractual payments from Takeda associated with the
conclusion of the TAP joint venture.
2) 2010 Net Earnings Excluding Specified Items excludes
after-tax charges of $689 million, or $0.44 per share,
associated primarily with the acquisition of Solvay
Pharmaceuticals, including recently announced
restructuring plans, as well as cost reduction
initiatives, $115 million, or $0.07 per share, for the
one-time impact of the devaluation of the Venezuelan
bolivar on balance sheet translation, $75 million, or
$0.05 per share, relating to acquired in-process
research and development related to the Neurocrine
collaboration, $106 million, or $0.07 per share, for a
litigation reserve, $60 million, or $0.04 per share, for
specific health care reform impact on deferred tax
assets, $88 million, or $0.06 per share, for costs of a
nutritional product recall and the withdrawal of
sibutramine, and $158 million, or $0.10 per share, for
impairment of the intangible asset related to
sibutramine.
2009 Net Earnings Excluding Specified Items excludes an after-
tax gain of $505 million, or $0.32 per share, relating to the
derecognition of a contingent liability that was recorded in
connection with the conclusion of the TAP joint venture and
an after-tax gain of $178 million, or $0.11 per share,
relating to a patent litigation settlement. This was
partially offset by $122 million, or $0.08 per share,
primarily relating to costs associated with the acquisition
of Advanced Medical Optics, $78 million, or $0.05 per share,
for litigation settlements and $236 million, or $0.14 per
share, for cost reduction initiatives and costs associated
with a delayed product launch.
3) Effective January 1, 2009, Abbott adopted FSP EITF 03-6-
1, "Determining Whether Instruments Granted in Share-
Based Payment Transactions Are Participating Securities,"
which requires the allocation of net earnings between
common shareholders and participating securities holders
when computing earnings per share. As a result, net
earnings allocated to common shares for the nine months
ended September 30, 2010 and 2009 was $3.177 billion and
$4.196 billion, respectively.
NOTE: See attached questions and answers section for further
explanation of Consolidated Statement of Earnings line items.
n/m = Percent change is not meaningful.
Questions & Answers
Q1) What drove the growth of Worldwide Pharmaceutical sales?
A1) Worldwide Pharmaceutical sales increased 21.7 percent, including an
unfavorable 1.6 percent effect of exchange rates, driven by strong
international pharmaceutical sales growth of approximately 30 percent. Sales
in the quarter reflected a contribution from the Solvay acquisition, which
closed in February 2010.
Growth in the quarter was led by HUMIRA, with global operational sales
growth of 16.1 percent, which excludes an unfavorable 3.5 percent effect of
exchange rates. International operational sales growth for HUMIRA was 23.2
percent, which excludes an unfavorable 6.6 percent effect of exchange rates.
International anti-TNF market growth trends remain strong, and HUMIRA
maintains a market-leading position in many of the international markets.
Global lipid franchise sales growth was 22 percent, including the
international TriCor sales contribution from the Solvay acquisition. U.S.
growth in both the TRILIPIX/TriCor franchise and Niaspan exceeded the growth
rate of the overall cholesterol market.
Q2) What drove the performance in Worldwide Vascular, Worldwide
Nutritional and Worldwide Diagnostics sales?
A2) Double-digit growth in Worldwide Vascular sales was driven by
international vascular sales growth of approximately 40 percent. Abbott holds
the number-one global position in drug-eluting stents, metallic stents and
guidewires. Abbott's drug-eluting stent franchise, which includes XIENCE V
and XIENCE PRIME, continues to perform well, including strong international
performance in Europe and Japan.
Worldwide Nutritional products sales decreased 1.5 percent, including a
favorable 0.8 percent impact from exchange. Growth in the United States
during the quarter was negatively impacted by product returns and lower
shipments resulting from an infant nutrition recall that was announced in
September. Excluding the recall, U.S. nutritionals sales growth would have
been in the high-single digits. International nutritional sales growth was
impacted by a difficult comparison to the prior year due to new product
launches that occurred in the third quarter of 2009 in many international
markets.
Growth in Worldwide Diagnostics was driven by high-single digit growth in
U.S. diagnostics sales, with continued double-digit growth in Abbott's
Molecular and Point of Care diagnostics businesses.
Q3) What drove the strong increase in the third-quarter gross margin
ratio?
A3) The gross margin ratio before and after specified items is shown
below (dollars in millions):
3Q10
----
Cost of Gross Gross
Products Margin Margin
Sold ------ %
---- ---
As reported (GAAP) $3,742 $4,933 56.9%
Adjusted for specified items:
Restructuring/integration (acquisitions/
cost reductions) ($141) $141 1.6%
Product recall/withdrawal costs ($84) $84 0.9%
Impairment of sibutramine intangible
asset ($189) $189 2.2%
As adjusted $3,328 $5,347 61.6%
The adjusted gross margin ratio of 61.6 percent was above Abbott's
previous forecast and increased significantly from the prior year when the
adjusted gross margin ratio was 57.1 percent. This increase was driven by
strong performance across several businesses, including vascular,
pharmaceuticals, diabetes and diagnostics, as well as a favorable impact from
foreign exchange rates.
Q4) What drove SG&A and R&D investment in the quarter?
A4) In the third quarter, both SG&A and R&D investment increased strong
double-digits, reflecting Abbott's continued investment in programs to drive
future growth, as well as increases associated with the addition of Solvay
Pharmaceuticals. Ongoing R&D expense as a percentage of sales was 10.6
percent, reflecting continued investment in Abbott's broad-based pipeline,
including programs in vascular devices, immunology, neuroscience, oncology
and HCV.
Q5) What was the tax rate for the third-quarter 2010?
A5) The ongoing tax rate this quarter was 16.3 percent, in line with
Abbott's previous forecast.
Q6) How did specified items affect reported results?
A6) Specified items impacted third-quarter results as follows:
3Q10
----
(dollars in millions, except earnings-
per-share) Earnings
--------
Pre- After- EPS
tax tax ---
--- ---
As reported (GAAP) $1,064 $891 $0.57
Adjusted for specified items:
Restructuring/integration
(acquisitions/cost reductions) $611 $513 $0.33
Product recall/withdrawal costs $84 $70 $0.05
Impairment of sibutramine intangible
asset $189 $158 $0.10
As adjusted $1,948 $1,632 $1.05
Restructuring/integration (acquisitions/cost reductions) is associated
with acquisition closing, restructuring, and integration costs, primarily the
recently announced Solvay Pharmaceuticals integration actions. This item also
includes cost reduction initiatives to improve efficiencies, primarily
related to previously announced efforts in the core laboratory diagnostic
business.
Product recall/withdrawal costs relate to a nutritional product recall
and voluntary withdrawal of sibutramine in the United States, Canada,
Australia and other countries, including inventory destruction and other
related expenses. Impairment of sibutramine intangible asset relates to the
non-cash write-off of the remaining balance of an intangible asset attributed
to the product at time of the acquisition.
The impact of specified items by Consolidated Statement of Earnings line
item is as follows (dollars in millions):
3Q10
----
Cost of R&D SG&A Other
Products --- ---- (Income)/
Sold Expense
---- -------
As reported (GAAP) $3,742 $1,079 $2,673 $5
Adjusted for specified items:
Restructuring/integration
(acquisitions/cost reductions) ($141) ($163) ($303) ($4)
Product recall/withdrawal costs ($84) -- -- --
Impairment of sibutramine
intangible asset ($189) -- -- --
----- --- --- ---
As adjusted $3,328 $916 $2,370 $1
Q7) What are the key areas of focus in Abbott's broad-based pipeline?
A7) Across its businesses, Abbott has more than 350 clinical trials
underway and expects to deliver more than 75 new products or indications over
the next five years. Following are select highlights from breakthrough
research across both pharmaceuticals and medical products pipelines:
- Oncology
- Abbott's oncology pipeline includes therapies that represent
promising, unique scientific approaches to treating cancer. Abbott
is focused on the development of targeted treatments that inhibit
tumor growth and improve response to common cancer therapies.
Abbott currently has nine new molecular entities in human trials.
- The oncology pipeline includes: ABT-263, a Bcl-2 family
protein antagonist; ABT-869, a multi-targeted kinase inhibitor; and
ABT-888, a PARP-inhibitor that is on track to move into Phase III
development for breast cancer early next year. Additionally, Abbott
is evaluating a number of promising mechanisms in its pre-clinical
pipeline, including work on an early stage cMET antibody biologic
for cancer.
- The acquisition of Facet Biotech brought several oncology
collaborations, including early- and mid-stage compounds that are
being studied for difficult to treat types of cancer, including
multiple myeloma and chronic lymphocytic leukemia.
- Neuroscience / Pain
- Abbott is conducting innovative research in neuroscience,
where it has developed compounds that target receptors in the brain
that help regulate mood, memory and other neurological functions to
address conditions such as Alzheimer's disease and schizophrenia.
Abbott has eight new molecular entities in clinical trials for
conditions such as schizophrenia, pain, Alzheimer's disease and
multiple sclerosis (MS). This includes three compounds in Phase II
for Alzheimer's.
- Abbott's neuroscience pipeline also includes a novel,
next-generation antibody, daclizumab, which recently entered into
Phase III development for relapsing remitting MS (RRMS), the most
common form of the disease.
- Abbott is also pursuing compounds that could provide relief
across a broad spectrum of pain states, such as chronic back pain,
postoperative pain and cancer pain.
- Women's Health
- The recent collaboration agreement with Neurocrine to develop
and commercialize elagolix for the treatment of
endometriosis-related pain brings Abbott a novel, first-in-class
oral gonadotropin-releasing hormone (GnRH) antagonist. A Phase IIb
study in endometriosis was recently completed.
- Chronic Kidney Disease
- Abbott announced an agreement to collaborate with Reata
Pharmaceuticals on the development of bardoxolone, an
investigational treatment for chronic kidney disease (CKD).
Bardoxolone is a first-in-class anti-inflammatory that activates
Nrf2, a pathway involved in the progression of CKD. A Phase IIb
study was recently completed and initiation of a global Phase III
trial is targeted to begin in the coming months.
- Immunology
- Abbott's scientific experience with the anti-TNF biologic
HUMIRA serves as a strong foundation for its continuing research in
immunology. In its pipeline, Abbott continues to explore additional
indications for HUMIRA, and recently submitted regulatory
applications in the United States and Europe for ABT-874, an
anti-IL 12/23 biologic for psoriasis. Abbott is also working to
advance development of its early discovery programs, including
oral DMARD therapies, as well as other potential biologic targets.
- Additionally, Abbott's proprietary DVD-Ig technology
represents an innovative approach that can target multiple
disease-causing antigens with a single biologic agent. This
technology could lead to combination biologics for complex
conditions such as cancer or rheumatoid arthritis, where multiple
pathways are involved in the disease.
- Hepatitis C
- Abbott's antiviral program is focused on the treatment of
hepatitis C (HCV), a disease that affects more than 180 million
people worldwide, with approximately three to four million people
newly infected each year. Abbott's broad-based HCV development
programs include its partnership with Enanta Pharmaceuticals to
discover protease inhibitors, as well as its internal programs
focused on additional viral targets, including polymerase
inhibitors.
- Abbott currently has three HCV compounds in clinical trials,
including a protease inhibitor, a polymerase inhibitor and an NS5A
inhibitor. Abbott is well positioned to explore combinations of
these compounds, a strategy with the potential to markedly
transform current treatment practices by shortening therapy
duration, improving tolerability and increasing cure rates.
- Molecular Diagnostics
- Abbott expects to launch more than 12 new molecular
diagnostic products over the next two to three years, including
several novel oncology and infectious disease assays, as well as
improved instrument systems. Abbott received approval from the U.S.
Food and Drug Administration (FDA) to market the Abbott RealTime
HBV assay for measuring viral load or the amount of hepatitis B
virus in a patient's blood, as well as, a new sensitive molecular
diagnostic test and instrument to simultaneously detect two of the
nation's most prevalent sexually transmitted diseases, gonorrhea
and chlamydia.
- Diagnostics
- In 2010, Abbott has launched a number of key assays on its
ARCHITECT immunochemistry platform, which will significantly
broaden its industry-leading menu. These tests include assays to
assess Chagas disease, ovarian cancer, acute kidney injury and HIV.
- Abbott expects to launch several more products this year and
also has several next generation instrument systems for hematology,
immunochemistry and blood screening in development.
- Vascular Devices
- Abbott has the industry's most robust vascular pipeline and
expects to deliver more than 10 coronary technologies over the next
five years. Abbott is working on well-staged incremental advances,
and truly game-changing technologies that have the ability to
restate the market.
- MitraClip - Presented additional data from the pivotal trial,
EVEREST II, at the TCT conference, which continued to demonstrate
the safety and sustained meaningful clinical benefits of the
therapy for the treatment of mitral regurgitation. Abbott's
MitraClip system is on the market in Europe and is currently under
review for approval by the FDA.
- XIENCE PRIME - Abbott's next-generation drug eluting stent
(DES) that capitalizes on the proven attributes of XIENCE V while
offering a novel stent design and a modified delivery system for
improved deliverability. XIENCE PRIME is on the market in Europe,
and is in clinical trials in the United States with an expected
launch in 2012.
- XIENCE Nano - XIENCE V for small vessels is in clinical
trials in the United States. This 2.25 mm diameter stent was
launched in Europe in 2008, and is expected to launch in the United
States in 2011.
- "Thinman" DES - Abbott is developing an ultra thin DES, which
would be the thinnest DES on the market at the time of launch. Thin
stent struts are designed to improve clinical outcomes by reducing
vessel injury upon deployment, enabling faster healing and
improving deliverability in complex anatomy.
- Bioresorbable Vascular Scaffold (BVS) - Abbott is developing
a BVS that is gradually resorbed into the vessel wall - much like
sutures are resorbed after healing a wound - with the potential to
restore full vessel motion. Abbott has the most advanced BVS
clinical program in the industry.
- Core Coronary products - Abbott is continuing to expand its
position in the more than $2 billion core coronary market, recently
launching a next-generation frontline balloon dilatation catheter
in Europe. Abbott plans to launch several new balloons in Europe
and the United States over the next year. In addition, Abbott has a
new line of guide wires in development.
- Vision Care
- Abbott expects more than 20 new products and technology
advancements over the next five years, including the launch of a
new contact lens solution that is underway in Europe and the United
States. In its market-leading LASIK business, Abbott is expanding
its proprietary laser platform into new vision correction
applications, including cataract surgery, and is developing new
diagnostic instruments and treatments to improve visual outcomes.
Abbott also continues to expand its premium and standard
intraocular lenses (IOL), including Synchrony, its next-generation
IOL approved in Europe and other countries around the world.
Synchrony is currently under FDA review in the United States.
Financial, John Thomas, +1-847-938-2655, or Larry Peepo, +1-847-935-6722, or Media, Melissa Brotz, +1-847-935-3456, or Scott Stoffel, +1-847-936-9502, all of Abbott
Tags: Abbott, Abbott park, Illinois, October 20, Western Europe
