ABBOTT PARK, Ill., April 21 /PRNewswire-FirstCall/ -- Abbott today announced financial results for the first quarter ended March 31, 2010.
"We delivered double-digit sales growth across each of our worldwide businesses in the first quarter, reflecting our balance, diversity and strength," said Miles D. White, chairman and chief executive officer, Abbott. "We also enhanced our emerging markets presence and pharmaceutical pipeline with the closing of the Solvay Pharmaceuticals acquisition and the announced acquisition of Facet Biotech, augmenting Abbott's long-term growth outlook."
Abbott updates 2010 outlook; continues to forecast double-digit earnings-per-share growth for 2010
Abbott is updating ongoing earnings-per-share guidance for the full-year 2010 to $4.13 to $4.18, excluding specified items. This guidance includes the impact of the recently enacted U.S. health care reform legislation in 2010. The midpoint of this guidance range reflects continued double-digit growth of approximately 12 percent over 2009.
Abbott forecasts specified items for the full-year 2010 of approximately $0.34 per share, primarily associated with health care reform impact on deferred tax assets, previously announced acquisitions, previously announced cost reduction initiatives, 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 $3.79 to $3.84 for the full-year 2010. This forecast excludes additional integration costs associated with the Solvay Pharmaceuticals acquisition that may occur, to be specified at a later date.
Abbott declares quarterly dividend
On Feb. 19, 2010, the board of directors of Abbott increased the company's quarterly common dividend to 44 cents per share, an increase of 10 percent over the prior period. The cash dividend is payable May 15, 2010, to shareholders of record at the close of business on April 15, 2010. This marks the 345th consecutive dividend paid by Abbott since 1924.
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 approximately 83,000 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 first-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.
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, 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.
Questions & Answers
Q1) What drove the growth of Worldwide Pharmaceutical sales?
A1) Worldwide Pharmaceutical sales increased 12.9 percent, including a favorable 4.4 percent effect of exchange rates. Sales included a partial quarter contribution from the Solvay acquisition, which closed in mid-February, partially offset by the continuing decline in Depakote sales due to generic competition. The quarter included six weeks of Solvay sales in the United States, and only two weeks of international sales from Solvay given Abbott's standard practice of reporting international sales on a one-month lag. In addition, the negative impact of higher Medicaid rebates as a result of U.S. health care reform has been reflected in the respective U.S. pharmaceutical product sales in the quarter.
Growth in the quarter was driven by strong performance from key franchises including HUMIRA and lipid management. HUMIRA global sales growth was 36.5 percent, with international growth of 39.2 percent. International anti-TNF market growth trends remain strong, and HUMIRA maintains a market-leading position in many of the international markets. U.S. HUMIRA sales were up 32.4 percent as demand for HUMIRA continues to outpace the market, with particularly strong growth in the dermatology and gastroenterology segments. The U.S. HUMIRA growth rate also benefited from a favorable comparison to the prior year.
Global lipid management franchise sales were up double-digits, including a modest partial quarter contribution of international fenofibrate sales, following the close of the Solvay acquisition. Niaspan sales continue to benefit from favorable clinical data presented last year. Total prescription growth for the franchise continues to exceed the growth rate of the cholesterol market.
Q2) What drove the strong performance in Worldwide Vascular, Worldwide Nutritional and Worldwide Diagnostics sales?
A2) Double-digit growth in Worldwide Vascular sales were driven by the continued global growth of XIENCE, which is now the number one drug-eluting stent (DES) in the world following the successful launch in Japan. Launched in February in Japan, XIENCE V captured the number one share position with share in excess of 40 percent. With the addition of Promus, the XIENCE platform share is already well in excess of 50 percent in Japan. As a reminder, the quarter included only February sales in Japan given Abbott's one-month lag for international reporting. In addition, strong international sales of XIENCE and XIENCE PRIME in Europe and other international markets also contributed to growth in the quarter.
Worldwide nutritional products sales increased 11.8 percent, including a favorable 2.6 percent impact from exchange. International nutritional product sales increased 18.1 percent, including 5.4 percent favorable exchange, reflecting strong growth in key emerging markets, including Latin America and Asia. Both pediatric and adult international nutritionals grew double-digits.
Double-digit growth in Worldwide Diagnostics reflects continued double-digit growth in Abbott's Molecular and Point of Care diagnostics businesses as well as strong growth in our international Core Laboratory Diagnostics business.
Q3) How did U.S. health care reform impact the first quarter?
A3) During the first quarter, U.S. healthcare reform legislation was enacted. Beginning in 2010, this legislation includes an increase in the basic Medicaid rebate rate from 15.1 percent to 23.1 percent and extends the rebate to drugs provided through Medicaid managed care organizations. As a result, sales in the first quarter were reduced by approximately $60 million, and ongoing earnings per share in the first quarter were reduced by $0.03 per share. Excluding this impact, first quarter ongoing earnings per share would have been $0.84, up 15.1 percent.
In addition, Abbott recorded a one-time charge in the first quarter of $60 million, or $0.04 per share, related to the impact on deferred tax assets associated with a provision of the U.S. health care reform legislation that will eliminate the Federal income tax deduction for prescription drug expenses of retirees for which companies receive reimbursement under the Medicare Part D drug subsidy program. See Questions and Answers 7 for further discussion.
Q4) What was the first-quarter gross margin ratio?
A4) The gross margin ratio before and after specified items is shown below (dollars in millions):
The adjusted gross margin ratio of 57.4 percent, above our previous forecast, was driven by strong performance across several businesses, including vascular and diagnostics, and less of a negative impact from foreign exchange than originally forecast. This was partially offset by the additional Medicaid rebates required under U.S. health care reform in the first quarter, which reduced sales by approximately $60 million.
Q5) What drove SG&A and R&D investment in the quarter?
A5) In the first quarter, both SG&A and R&D reflect Abbott's continued investment in programs to drive future growth, as well as increases associated with the partial quarter addition of Solvay Pharmaceuticals. R&D investment, up 12.2 percent, reflected continued investment in our broad-based pipeline, including programs in vascular devices, immunology, neuroscience, oncology and hepatitis C.
Q6) What was the tax rate for the first-quarter 2010?
A6) The ongoing tax rate this quarter was 16.3 percent, in line with our previous forecast. The reported first-quarter tax rate is reconciled to the ongoing rate below (dollars in millions):
Q7) How did specified items affect reported results?
A7) Specified items impacted first-quarter results as follows:
As previously disclosed, Venezuela devaluation reflects the one-time non-cash impact of the bolivar devaluation, which occurred in early January, on the translation of the balance sheet associated with Abbott's business in Venezuela. Health care reform reflects a one-time charge from the recently enacted U.S. health care reform legislation related to deferred tax assets, due to the elimination of the Federal income tax deduction for prescription drug expenses of retirees for which companies receive reimbursement under the Medicare Part D drug subsidy program. Acquisition related is associated with closing costs related to Solvay and the costs to integrate the acquisitions of Solvay, AMO, Evalve and Visiogen. Cost reduction initiatives include actions to improve efficiencies, including the previously announced efforts in the core laboratory diagnostic business.
The impact of specified items by Consolidated Statement of Earnings line item is as follows (dollars in millions):
Q8) What are the key areas of focus in Abbott's broad-based pipeline?
A8) Abbott is conducting leading-edge research across the company. In 2010, we expect to see continued advancement in our broad-based pipeline, including the anticipated approval for five new products or indications and data for numerous Phase I and Phase II compounds. In our leading vascular pipeline, Abbott expects to launch more than 10 new products over the next five years, including MitraClip device in 2011 for mitral regurgitation, the most common heart valve defect. In addition, we are planning numerous new product launches in our U.S. and international nutritionals business, as well as several key diagnostic assay launches in our core laboratory diagnostics business. Following are select highlights from breakthrough research across both pharmaceuticals and medical products pipelines:
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