Biotech Values

[DewDiligence]

ABT Reports 4Q10 Results

[ABT is another company that’s a major beneficiary of The Global Demographic Tailwind, but has been unable to convince investors that it has bright prospects. Thanks to the recent Solvay and Piramal acquisitions (#msg-41922225, #msg-50436738), ABT now derives almost 60% of sales from outside the US, and a significant proportion of *that* is from emerging markets.

In 4Q10, Humira (which comprises 30% of ABT’s pharma sales and 19% of the overall company’s sales) grew 15% YoY in constant currencies to an annualized run rate of $7.5B (!), gaining market share vs Enbrel and Remicade. The newer entrants in the RA/autoimmune market such as Simponi, Stelara, and Actemra are evidently having little or no effect on the growth of Humira, which is what ABT has been predicting all along.

Coincident with its 4Q10 report, ABT issued 2011 non-GAAP EPS guidance of $4.54-4.64, which represents about 10% growth from 2010. (The non-GAAP EPS guidance excludes an expected $0.78/sh of charges for acquisition-related restructuring and the 2% workforce reduction that was announced coincident with the 4Q10 results.) Thus, ABT has a forward P/E of only 10x, which is a bargain, IMO, for a blue-chip company that’s a major beneficiary of The Global Demographic Tailwind and has no consequential patent expirations to contend with in the next few years.

ABT’s own 4Q10 PR is at http://finance.yahoo.com/news/Abbott-Reports-DoubleDigit-prnews-1406223331.html?x=0&.v=1 .]

http://www.reuters.com/article/idUSN2528992320110126?feedType=RSS&feedName=basicMaterialsSector&rpc=43

›Jan 26, 2011 5:25pm EST
By Ransdell Pierson

NEW YORK, Jan 26 (Reuters) - Abbott Laboratories (ABT) forecast double-digit profit growth in 2011, but barely as much as Wall Street expects, and said it will cut 1,900 jobs over several years to offset costs of U.S. healthcare reforms.

The company, whose shares fell 2.5 percent to $46.75, also reported quarterly sales and earnings that topped forecasts, fueled by demand for its prescription drugs and heart stents.

Solid fourth-quarter results for the healthcare company contrasted with those of its larger rival, Johnson & Johnson (JNJ), which on Tuesday reported sales far short of estimates and forecast 2011 profit growth of 1 percent to 3 percent.

Abbott will post double-digit earnings growth this year, in 2012 and likely in following years, said Chief Executive Miles White, in a conference call with analysts, helped by a pipeline of experimental drugs that he thinks are "under-appreciated" by Wall Street.

"I don't think anyone else will be growing that much this year," said Morningstar analyst Damien Conover. "The rest of the industry will be growing in the low single-digits."

The positive long-term earnings picture and the company's limited exposure to generics in coming years make Abbott attractive and a bigger buying opportunity, given Wednesday's share declines, Conover said .

"There's a lot of potential here for the company and the stock," said Conover, who has a two-year price target of $68 on Abbott. Conover said Abbott shares are trading at parity with the drug group, at about 10 times expected 2011 per-share earnings, despite the drugmaker's superior profit outlook.

Sanford Bernstein analyst Derrick Sung cautioned Abbott may become too dependent on a single product: its Humira treatment for rheumatoid arthritis. He said the injectable drug, whose quarterly sales rose 13 percent to $1.88 billion, accounts for about half of Abbott's operating profits.

"As Humira continues to drive growth over the next few years, Abbott's dependency on Humira will actually increase," Sung said in a research note. In the meantime, he warned that Pfizer Inc (PFE) and other drugmakers are developing new treatments that will dent Humira's sales. [Analysts have been predicting the demise of Humira for as long as I can remember.]

Abbott said it earned $1.44 billion, or 92 cents per share, in the quarter, with results tempered by costs of recent acquisitions. That compared with $1.54 billion, or 98 cents per share, a year earlier. Excluding special items, Abbott earned $1.30 per share, a penny better than analysts' average forecast, according to Thomson Reuters I/B/E/S.

Abbott forecast 2011 earnings of $4.54 to $4.64 per share. But most of the forecast range is below the average Wall Street estimate of $4.63 per share.

The company said most of the 1,900 planned job cuts, representing 2 percent of its global workforce, will come from its U.S. pharmaceutical commercial and manufacturing operations.

"We're taking this action in our U.S. pharmaceutical business as a result of changes in the healthcare industry, including healthcare reform and the challenging regulatory environment," a company spokesman said.

Sanford Bernstein's Sung said the layoffs are expected to save Abbott $295 million over the next few years. But costs of healthcare reform to Abbott this year alone will likely top $200 million, while European austerity measures reduce company sales by more than $250 million in 2011, he said.

Pricing pressures will remain a long-term challenge for Abbott and its rivals, White said. J&J executives on Tuesday also cited growing pressure from governments and insurers to curb costs.

Abbott sales rose 13.4 percent to $9.97 billion in the fourth quarter, helped by the recent acquisition of Solvay SA's medicines business, topping Wall Street forecasts of $9.89 billon.

Global pharmaceutical sales rose almost 23 percent to $5.94 billion. Combined sales of its Trilipix and TriCor medicines to lower blood fats called triglycerides rose 19 percent to $499 million.

Sales of Niaspan, which raises "good" HDL cholesterol, gained almost 13 percent to $286 million. Abbott's coronary stents, used to prop open arteries that have been cleared of plaque, remained a dependable growth driver, with sales jumping almost 20 percent to $514 million.

Sales of pediatric nutritionals remained a disappointment, falling nearly 6 percent to $742 million following a recall last September of the company's beetle-contaminated Similac infant formula.‹