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Abbott Profit Slips as Depakote Faces Cheap Copies

http://www.bloomberg.com/apps/news?pid=20601202&sid=aWTXKa.Q1Su8

By Tom Randall

July 15 (Bloomberg) -- Abbott Laboratories’ profit fell 2.6 percent as sales missed estimates, hurt by the rising dollar and growing generic competition to the anti-seizure medicine Depakote. The company’s shares declined.

Second-quarter net income dropped to $1.29 billion, or 83 cents a share, also pulled down by expenses for an acquisition and cost-cutting moves, the Abbott Park, Illinois-based company said today in a statement. Sales increased 2.5 percent to $7.5 billion, less than the $7.57 billion average estimate of 10 analysts.

Abbott Chief Executive Officer Miles White is pushing new heart stents and eye-surgery equipment to reduce reliance on drugs. In addition to growing competition for Depakote, Abbott faces the prospect that sales of Humira -- the company’s biggest product, with $4.5 billion in revenue last year -- may slow as consumers reduce spending, said Rick Wise, an analyst at Leerink Swann & Co. in New York.

“Given bullish sentiment heading into the quarter, investors could focus on the sales miss,” Wise said in a note to clients today. “Humira growth recovered a bit in the quarter. Investors may question whether” the renewed sales growth is sustainable, he said.

Sales of Depakote tumbled 75 percent to $102 million amid competition from generics. The drug had sales of $1.58 billion in 2007 before losing exclusivity in July 2008, and revenue slipped to $1.36 billion last year.

Abbott fell $1.21, or 2.6 percent, to $45.28 at 4 p.m. in New York Stock Exchange composite trading. The stock has declined 22 percent in the past 12 months.

Third Quarter

Abbott forecast third-quarter profit of 83 to 85 cents a share, or 5 cents higher when certain costs are excluded. Analysts had expected 90 cents a share, with the items excluded.

The company recorded charges of $67 million for cost- reducing moves and $33 million for expenses related to the acquisition of Advanced Medical Optics, the world’s top maker of eye-surgery equipment.

With the purchase, valued at $2.8 billion and completed in February, pharmaceuticals make up about half of Abbott’s sales. The deal installed Abbott in the $22 billion-a-year eye-care market and bolstered a medical device business that includes stents, diagnostic tests and insulin pumps for diabetics.

Advanced Medical’s sales for the first full reported quarter at Abbott were $265 million.

Abbott is interested in small- to medium-sized acquisitions to expand its product pipeline, and isn’t interested in mega- mergers, said Thomas Freyman, Abbott’s chief financial officer, repeating comments in a conference call that he has made previously. He didn’t define the size categories.

No Interest in Solvay

The company isn’t looking to buy drugs owned by Solvay SA to expand its presence in fenofibrates, medicines used to lower cholesterol and triglyceride levels, Freyman said.

Solvay, based in Brussels, is considering a sale of its drug division, including the Tricor cholesterol pill that it co- markets with Abbott.

“We have no interest in expanding our participation in the fenofibrate market,” Freyman said. “We already have a presence there and an adequate investment.”

The strengthening dollar pared the value of revenue outside the U.S. for the quarter and lowered total sales by 8 percentage points, Abbott said. The dollar gained 11 percent against six major world currencies during the last 12 months, according to data compiled by Bloomberg.

Earnings Quality

“Aside from the greater-than-expected foreign exchange hit, most segments came in roughly in line with our forecast,” said Michael Weinstein, a JPMorgan Chase & Co. analyst, in a note to clients. “Earnings quality was good, in our view. Humira sales were slightly ahead of our forecast.”

Humira sales rose 20 percent to $1.31 billion, compared with $1.22 billion, the average of two estimates compiled by Bloomberg. Sales of the drug, which costs an average of $19,000 a year for each patient, grew 17 percent in the first quarter, less than analysts expected, as the global recession deepened. Abbott won expanded approval early last year for Humira to treat the skin disease psoriasis and juvenile rheumatoid arthritis.

Competitors include Johnson & Johnson’s Remicade and Amgen Inc.’s Enbrel. In June, J&J won $1.67 billion, the largest patent verdict in U.S. history, from Abbott over an invention used to produce Humira. Abbott pledged to appeal.

Biggest Seller

Humira, the company’s biggest seller, was responsible for about 17 percent of Abbott’s revenue for the second quarter. The company has projected Humira’s global sales growth of 15 percent to 20 percent this year.

Revenue from Abbott’s Xience, a drug-coated mesh sleeve that props open blood vessels, helped drive U.S. vascular sales up 34 percent to $658 million. Xience took the leading share of the $4 billion stent market less than six months after approval in July 2008.

Sales at Abbott Nutritionals, maker of Similac infant formula and Ensure vitamin-fortified drinks to replace meals, rose 4 percent to $1.28 billion for the second quarter. U.S. sales rose 10 percent, while international nutritional products declined 1.9 percent.