Biotech Values

[genisi]

Abbott sales fall short of estimates; shares lower

http://www.reuters.com/article/idCNN1929480820101020?rpc=44

Wed Oct 20, 2010 12:05pm EDT

* Q3 EPS ex-items $1.05; Street view $1.04

* Sales rise 11.8 pct to $8.68 bln; Street view $8.92 bln

* Shares fall 1 percent (Adds analyst and company comments; updates share move)

By Ransdell Pierson

NEW YORK, Oct 20 (Reuters) - Abbott Laboratories (ABT.N) reported quarterly sales below Wall Street expectations, hurt by a recall of Similac infant formula, sending its shares down 1 percent.

Third-quarter profit fell almost 40 percent, depressed by the September recall and costs of the recent acquisition of Solvay SA's (SOLB.BR) pharmaceuticals business.

Excluding special items, the suburban Chicago drugmaker earned $1.05 per share. Analysts on average had expected $1.04, according to Thomson Reuters I/B/E/S.

Revenue rose 11.8 percent to $8.68 billion, below Wall Street expectations of $8.92 billion. Sales growth in the second quarter was 18 percent.

Abbott, like diversified healthcare rival Johnson & Johnson on Tuesday, was punished by Wall Street for not delivering expected sales growth.

Abbott shares were down amid moderate gains for the drug sector and broad stock market.

"The sales number was weak," said JPMorgan analyst Michael Weinstein. He cited disappointing revenue from Abbott's nutritionals and its line of medical diagnostics. He said many analysts had not adjusted their sales estimates to account for the $100 million cost of the Similac recall.

Leerink Swann analyst Rick Wise said Abbott's sales shortfall was mostly due to the recall.

Even so, he noted the company's profit margin improved by more than 1 percentage point, which Abbott attributed to strong performance of its prescription drugs, diabetes care and diagnostic products.

"Better-than-expected gross margin drove much of the in-line earnings performance, highlighting the ongoing leverage and earnings power in Abbott's business," Wise said.

NARROW BEAT

Third-quarter profit fell to $891 million, or 57 cents per share, from $1.48 billion, or 95 cents per share, a year earlier.

Global sales of nutritional products -- normally a strong contributor to company results -- fell 1.5 percent to $1.37 billion, largely due to the Similac recall. The recall came after beetles were found in the powdered infant product and in a Michigan plant where it is made.

Abbott said Similac is now being produced again in the plant and that retailers should have near-normal supplies of the formula in coming months. But the company forecast a high-single-digit percentage decline in U.S. nutritionals sales in the fourth quarter.

Worldwide sales of Abbott's diagnostic products edged up 0.8 percent to $916 million, a marked slowdown from 8 percent growth seen in the second quarter.

Pharmaceuticals revenue rose 22 percent to $4.94 billion in the third quarter, bolstered by brands acquired in the Solvay deal. Sales of arthritis treatment Humira, Abbott's best-selling product in recent years, rose almost 13 percent to $1.68 billion.

Sales of Trilipix and TriCor, which lower blood fats called triglycerides, rose 22 percent to $404 million. But sales of HIV treatment Kaletra fell 7 percent to $328 million amid competition from rival medicines.

Revenue from Abbott's vascular products, most notably its market-leading Xience heart stent, rose almost 19 percent to $790 million.

Abbott raised the low end of its full-year earnings forecast, excluding special items, to $4.16 a share from $4.13 in July, while keeping the high end at $4.18.

The new forecast translates into gains of 11.8 percent to 12.4 percent over last year -- the kind of double-digit profit growth that now eludes most rival drugmakers.