Abbott Labs (ABT) reported second quarter earnings of $1.12 per share, a penny above the Zacks Consensus Estimate and at the higher end of the guidance range provided by the company.
Earnings increased 10.9% from the year-earlier period, as higher revenues helped drive results.
Including one-time items, earnings jumped 48.2% to $1.23 per share.
Second quarter revenues increased 9% to $9.6 billion, just above the Zacks Consensus Estimate of $9.5 billion.
The Quarter in Detail
All reportable segments performed well during the quarter. While sales for the Durable Growth Business increased 7.5% to $4.0 billion, Proprietary Pharmaceutical sales increased 13% to $4.2 billion. Meanwhile, sales for the Innovation-Driven Device Business and Emerging Markets grew 3.1% and 23.2%, respectively.
Performance of the Durable Growth Business was driven by strong Established Pharmaceuticals sales, including contributions from the Piramal Healthcare Solutions acquisition. Performance was also driven by stable sales growth in the Core Laboratory Diagnostics, Diabetes Care and Point of Care Diagnostics businesses. The Established Pharmaceuticals division posted second quarter sales of $1.3 billion. International Nutritionals, which grew 13.7%, also contributed to the segment’s performance.
Proprietary Pharmaceutical sales were $4.2 billion, up 13%. Humira was a major contributor with sales coming in at $1.9 billion, up 25.3%. Humira recorded sales growth in both the US (18.5%) and international markets (30.6%) during the quarter. Abbott Labs is looking to get Humira approved for ulcerative colitis in the US and the EU.
The Nutritional business grew 5.4% to $1.5 billion. Nutrition sales in the US continued to be impacted by the September 2010 recall of infant formula product Similac. Pediatric nutritional sales in the US were down 10.5% during the quarter. With Similac production resuming in October 2010, Nutritional business sales should pick up.
Outside the US, Nutrition sales should continue to experience double-digit growth with stronger performance in emerging markets. Abbott Labs reported strong growth in Asia and Latin America, where the company is expanding its presence and gaining share with the introduction of new products.
2011 Outlook Raised
Following the release of second quarter results, Abbott Labs raised its guidance for 2011 by 4 cents. The company now expects 2011 earnings in the range of $4.58 to $4.68, up from the previously issued guidance range of $4.54 to $4.64. The Zacks Consensus Estimate for 2011 currently stands at $4.61.
Pipeline Update
Abbott Labs also provided an update on its pipeline. During the first half of 2011, the company launched several new products or indications. These include Lupron 6-Month Depot, Androgel 1.62%, the Creon infant-specific dosage, XIENCE nano, TREK Coronary Balloon System and the FreeStyle InsuLinx Blood Glucose Monitoring System.
Abbott Labs also submitted marketing applications for XIENCE PRIME, Humira (for ulcerative colitis) and the ALK gene molecular diagnostics test.
Abbott Labs is working on boosting its vascular products portfolio and expects to launch more than 10 technologies in the next five years. These include the potential US launches of MitraClip and XIENCE PRIME (US launch expected in 2012).
Meanwhile, the acquisition of Facet Biotech has helped strengthen Abbott Labs' early- and mid-stage oncology portfolio. The company moved elotuzumab, which is being developed with Bristol-Myers Squibb (BMY), into phase III studies for multiple myeloma.
Abbott Labs is also working on strengthening its neuroscience portfolio and has several candidates in different stages of development for the treatment of diseases like schizophrenia, pain, Parkinson’s Alzheimer’s and multiple sclerosis. Abbott Labs, along with partner Biogen (BIIB), moved daclizumab into a phase III study for the treatment of relapsing-remitting multiple sclerosis (RRMS). Results from the phase II SELECT study will be presented later this year.
Another promising pipeline candidate is bardoxolone, which moved into phase III studies recently for chronic kidney disease.
Neutral on Abbott Labs
We currently have a Neutral recommendation on Abbott Labs, which carries a Zacks #3 Rank (short-term “Hold” rating). The company’s strong business segments and contributions from recent acquisitions should help fortify growth. While lead product Humira will continue to be a huge growth driver in the next couple of years, we remain concerned about Abbott Labs’ dependence on the product.
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