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Abbott Reports 14.4 Percent Sales Growth in Third Quarter- Worldwide Pharmaceutical Sales Increased 19.6 Percent -
ABBOTT PARK, Ill., Oct. 17 /PRNewswire-FirstCall/ -- Abbott today announced financial results for the third quarter ended Sept. 30, 2007.
* Diluted earnings per share, excluding specified items, were $0.67,
above Abbott's previously announced guidance range of $0.64 to
$0.66. Diluted earnings per share under Generally Accepted
Accounting Principles (GAAP) were $0.46.
* Based on its strong results year to date, Abbott is confirming its
2007 earnings-per-share outlook and raising the lower end of its
previous guidance range. In addition, the company is confirming its
outlook for an accelerating rate of earnings-per-share growth in
2008 compared to 2007.
* Worldwide sales increased 14.4 percent to $6.4 billion, including a
favorable 2.8 percent effect of exchange rates.
* U.S. pharmaceutical sales increased 17.5 percent and International
pharmaceutical sales increased 22.2 percent, driven by double-digit
growth in HUMIRA(R), Kaletra(R) and TriCor(R), and included $167
million of Niaspan(R) sales. Based on the continued strong sales
performance of HUMIRA, which contributed more than $800 million in
worldwide sales in the third quarter, Abbott estimates 2007 global
sales of $3 billion.
* Worldwide medical products sales increased 12.0 percent, driven by
13.8 percent growth in worldwide Diabetes Care sales, 14.9 percent
growth worldwide in Abbott Vascular, and 14.4 percent growth in
International diagnostics sales.
* Worldwide nutritional products sales were led by 15.6 percent growth
in International nutritionals, with continued strong performance in
key emerging growth markets.
"Abbott's strong performance this quarter was again balanced across our major broad-based businesses," said Miles D. White, chairman and chief executive officer, Abbott. "We expect this momentum to continue in the fourth quarter and into 2008, when the strength of our diversity will drive an accelerating rate of earnings-per-share growth compared to 2007."
The following is a summary of third-quarter 2007 sales.
Impact of
Sales Summary - 3Q07 % Change Exchange on
Quarter Ended 9/30/07 ($ millions) vs. 3Q06 % Change
Total Sales $6,377 14.4 2.8
Total U.S. Sales $3,125 10.2 ---
Total International Sales $3,252 18.8 5.7
Worldwide Pharmaceutical Sales $3,531 19.6 3.0
U.S. Pharmaceuticals $1,896 17.5 ---
International Pharmaceuticals $1,635 22.2 6.5
Worldwide Nutritional Sales $1,102 4.4 (a) 1.8
U.S. Nutritionals $587 (3.8)(a) ---
International Nutritionals $515 15.6 4.4
Worldwide Diagnostics Sales (b) $790 9.8 3.9
U.S. Diagnostics $201 (1.7) ---
International Diagnostics $589 14.4 5.5
Worldwide Vascular Sales $403 14.9 2.4
U.S. Vascular $201 1.2 ---
International Vascular $202 33.0 5.6
Other Sales (c) $551 10.9 2.3
(a) Reflects the impact of the completion of the U.S. co-promotion of
Synagis in 2006. Excluding the U.S. sales of Synagis in 2006,
Worldwide Nutritional Sales increased 10.8 percent and U.S.
Nutritional sales increased 6.9 percent.
(b) Includes sales from the molecular diagnostics and core laboratory
diagnostics businesses, which includes point of care.
(c) Includes sales from diabetes, bulk pharmaceuticals, spine and animal
health businesses.
Note: See "Consolidated Statement of Earnings" for more information.
The following is a summary of sales for the first nine months of 2007.
Impact of
Sales Summary - 9M07 % Change Exchange on
Nine Months Ended 9/30/07 ($ millions) vs. 9M06 % Change
Total Sales $18,693 15.0 2.7
Total U.S. Sales $9,283 12.5 ---
Total International Sales $9,410 17.5 5.5
Worldwide Pharmaceutical Sales $10,435 17.8 2.8
U.S. Pharmaceuticals $5,500 20.3 ---
International Pharmaceuticals $4,935 15.1 5.8
Worldwide Nutritional Sales $3,201 (1.4)(a) 1.4
U.S. Nutritionals $1,733 (12.3)(a) ---
International Nutritionals $1,468 15.6 3.6
Worldwide Diagnostics Sales (b) $2,299 10.5 3.9
U.S. Diagnostics $607 2.5 ---
International Diagnostics $1,692 13.6 5.4
Worldwide Vascular Sales $1,246 80.0 2.4
U.S. Vascular $667 58.1 ---
International Vascular $579 114.2 6.1
Other Sales (c) $1,512 9.6 3.4
(a) Reflects the impact of the completion of the U.S. co-promotion of
Synagis in 2006. Excluding the U.S. sales of Synagis in 2006,
Worldwide Nutritional Sales increased 9.0 percent and U.S.
Nutritional sales increased 4.0 percent.
(b) Includes sales from the molecular diagnostics and core laboratory
diagnostics businesses, which includes point of care.
(c) Includes sales from diabetes, bulk pharmaceuticals, spine and animal
health businesses.
Note: See "Consolidated Statement of Earnings" for more information.
The following is a summary of Abbott's third-quarter 2007 sales for
selected products.
Quarter Ended 9/30/07
Percent Percent Percent
(dollars in millions) Change Rest Change Change
U.S. vs. of vs. Global vs.
Sales 3Q06 World 3Q06 Sales 3Q06
Pharmaceutical Products
HUMIRA $427 40.0 $376 59.6 (a) $803 48.5
Depakote $358 12.3 $25 27.2 $383 13.1
Kaletra $136 (0.5) $202 28.8 (b) $338 15.2
TriCor $300 12.8 --- --- $300 12.8
Ultane/Sevorane $49 (12.7) $139 3.9 (c) $188 (1.0)
Niaspan $167 n/a --- --- $167 n/a
Biaxin (clarithromycin) $9 (43.0) $122 (0.4) (d) $131 (5.2)
Synthroid $110 (16.5) $20 18.7 $130 (12.6)
Nutritional Products
Pediatric Nutritionals $326 14.2 $275 18.5 $601 16.1
Adult Nutritionals $253 (1.1) $240 12.6 (e) $493 5.1
Medical Products
Abbott Diabetes Care $146 10.0 $176 17.2 (f) $322 13.8
Coronary Stents $68 89.4 $95 81.3 $163 84.6
Other Coronary $69 (21.7) $75 1.9 $144 (11.0)
Endovascular $63 (15.3) $33 23.3 $96 (5.2)
(a) Without the positive impact of exchange of 10.5 percent, HUMIRA
sales increased 49.1 percent internationally.
(b) Without the positive impact of exchange of 6.7 percent, Kaletra
sales increased 22.1 percent internationally.
(c) Without the positive impact of exchange of 5.8 percent, Sevorane
sales decreased 1.9 percent internationally.
(d) Without the positive impact of exchange of 3.4 percent,
clarithromycin sales decreased 3.8 percent internationally.
(e) Without the positive impact of exchange of 4.3 percent, Adult
Nutritionals sales increased 8.3 percent internationally.
(f) Without the positive impact of exchange of 7.0 percent, Abbott
Diabetes Care sales increased 10.2 percent internationally.
n/a = Percent change is not applicable due to the acquisition of Niaspan
in the fourth-quarter 2006.
The following is a summary of sales for the first nine months of 2007 for selected products.
Nine Months Ended 9/30/07
Percent Percent Percent
(dollars in millions) Change Rest Change Change
U.S. vs. of vs. Global vs.
Sales 9M06 World 9M06 Sales 9M06
Pharmaceutical Products
HUMIRA $1,123 39.3 $986 59.8 (a) $2,109 48.2
Depakote $1,045 23.5 $69 20.2 $1,114 23.3
Kaletra $385 2.7 $569 22.6 (b) $954 13.7
TriCor $826 14.4 --- --- $826 14.4
Ultane/Sevorane $150 (26.2) $409 1.9 (c) $559 (7.6)
Biaxin (clarithromycin) $21 (78.4) $504 3.9 (d) $525 (9.6)
Niaspan $480 n/a --- --- $480 n/a
Synthroid $325 (8.6) $55 15.4 $380 (5.8)
Nutritional Products
Pediatric Nutritionals $908 8.9 $792 18.5 $1,700 13.2
Adult Nutritionals $797 (0.9) $677 12.4 (e) $1,474 4.8
Medical Products
Abbott Diabetes Care $419 1.8 $496 14.1 (f) $915 8.1
Coronary Stents $229 n/m $260 n/m $489 n/m
Other Coronary $238 33.8 $223 87.4 $461 55.3
Endovascular $201 11.8 $95 51.8 $296 22.1
(a) Without the positive impact of exchange of 11.7 percent, HUMIRA
sales increased 48.1 percent internationally.
(b) Without the positive impact of exchange of 7.0 percent, Kaletra
sales increased 15.6 percent internationally.
(c) Without the positive impact of exchange of 5.1 percent, Sevorane
sales decreased 3.2 percent internationally.
(d) Without the positive impact of exchange of 3.9 percent,
clarithromycin sales were flat internationally.
(e) Without the positive impact of exchange of 4.0 percent, Adult
Nutritionals sales increased 8.4 percent internationally.
(f) Without the positive impact of exchange of 7.2 percent, Abbott
Diabetes Care sales increased 6.9 percent internationally.
n/a = Percent change is not applicable due to the acquisition of Niaspan
in the fourth-quarter 2006.
n/m = Percent change is not meaningful.
Business Highlights
* Abbott and AstraZeneca to Advance ABT-335 in Fixed-Dose Combination
-- Abbott and AstraZeneca announced the decision to advance Abbott's
next-generation fenofibrate, ABT-335, as part of the fixed-dose
combination program with Crestor. The combination program is
proceeding on schedule and a regulatory application for the new
combination therapy remains on target for submission in 2009.
* Clinical Study Initiated for Renal Artery Stenosis (RAS) -- Abbott
enrolled its first patient in a clinical study to evaluate the use
of the investigational RX Herculink(R) Elite(TM) Renal Stent System
to treat patients with RAS. Patients with RAS have plaque buildup in
the renal arteries that can lead to high blood pressure.
Approximately 5 million people in the United States, most often men
age 50 to 70, are affected by RAS.
* Abbott Submits Kaletra(R) for Approval for Pediatric Use -- In July,
Abbott submitted global regulatory applications for a new,
lower-strength version of its leading HIV protease inhibitor tablet
known as Kaletra and Aluvia(R). Kaletra/Aluvia would be the only
co-formulated protease inhibitor tablet that could be used in
children. More than 2 million children worldwide are living with
HIV/AIDS.
* Psoriasis Data for HUMIRA(R) and ABT-874 -- At the World Congress of
Dermatology, Abbott presented Phase III study results for HUMIRA in
the treatment of psoriasis. HUMIRA represents a major advancement in
the treatment of psoriasis, with exceptional skin clearance and a
well-established safety profile that has been demonstrated in more
than 10 years of patient use. Abbott has submitted its global
regulatory application for HUMIRA in the treatment of psoriasis and
expects a response from regulatory agencies in the first quarter of
2008.
Abbott also presented psoriasis data from ABT-874, its fully-human
monoclonal antibody designed to target and neutralize interleukin-12
and interleukin-23 (IL-12/23). These data are excellent,
demonstrating a significant reduction of psoriasis symptoms in the
majority of patients treated. Abbott expects to advance ABT-874 into
final Phase III psoriasis studies before year-end.
* HUMIRA Wins Scientific Innovation Award -- Abbott's leading anti-TNF
therapy, HUMIRA, has been honored with the 2007 Galen Prize for Best
Biotechnology Product. The Galen Prize, considered equivalent to the
Nobel Prize and awarded by Prix Galien USA, is one of the highest
accolades in the pharmaceutical and biomedical industry, recognizing
excellence in medical and scientific research and innovation.
* Abbott Launches NutriPals(TM) Fruit Bars -- Abbott launched
PediaSure(R) NutriPals Fruit Bars, the only kids' snack bar made
with one serving of real fruit in every bar. With 9 times more fruit
than a leading cereal bar, NutriPals Fruit Bars are a good source of
protein, fiber and more than 20 vitamins and minerals.
* U.S. Food and Drug Administration (FDA) Waiver Allows Broader Use of
the i-STAT Handheld Analyzer -- The FDA granted waived status under
the Clinical Laboratory Improvement Amendments of 1988 (CLIA) for
its handheld i-STAT CHEM8+ test cartridge, making it more widely
available for use beyond the hospital setting. The waiver indicates
the device can be made more broadly available to health care
providers where fast results are needed.
Abbott confirms earnings-per-share outlook for 2007 and 2008
Based on the company's strong results year to date, Abbott is confirming its 2007 earnings-per-share outlook and raising the lower end of its previous guidance range. As a result, Abbott's earnings-per-share guidance for 2007 is now $2.82 to $2.84 and for the fourth quarter is $0.91 to $0.93, both excluding specified items. Abbott forecasts specified items for the full-year 2007 of approximately $0.44 per share, primarily associated with acquisition integration, cost reduction initiatives, a write-down of Omnicef inventory and adjustments related to Abbott's ownership of Boston Scientific stock, as previously disclosed. Including specified items, projected earnings per share under GAAP would be $2.38 to $2.40 for the full-year 2007. Abbott forecasts specified items for the fourth-quarter 2007 of approximately $0.07 per share, primarily associated with acquisition integration and cost reduction initiatives. Including these specified items, projected earnings per share under GAAP would be $0.84 to $0.86 for the fourth-quarter 2007. For 2008, Abbott continues to forecast an accelerating rate of earnings-per-share growth over 2007. Abbott declares quarterly dividend On Sept. 14, 2007, the board of directors of Abbott declared the company's quarterly common dividend of 32.5 cents per share. The cash dividend is payable Nov. 15, 2007, to shareholders of record at the close of business on Oct. 15, 2007. This marks the 335th consecutive dividend paid by Abbott since 1924. About Abbott 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 65,000 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 http://www.abbott.com. Abbott will webcast its live third-quarter earnings conference call through its Investor Relations Web site at http://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.
- Private Securities Litigation Reform Act of 1995 -
A Caution Concerning Forward-Looking Statements
Some statements in this news release may be forward-looking statements for the purposes of the Private Securities Litigation Reform Act of 1995. We caution that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated. 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, 2006, and are incorporated by reference. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments.
Abbott Laboratories and Subsidiaries
Consolidated Statement of Earnings
Third Quarter Ended September 30, 2007 and 2006
(unaudited)
Percent
2007 2006 Change
Net Sales $6,376,706,000 $5,573,770,000 14.4
Cost of products sold 2,864,030,000 2,391,218,000 19.8
Research and
development 640,718,000 617,625,000 3.7
Acquired in-process
research and development --- 214,000,000 n/m
Selling, general and
administrative 1,945,404,000 1,661,761,000 17.1
Total Operating Cost
and Expenses 5,450,152,000 4,884,604,000 11.6
Operating earnings 926,554,000 689,166,000 34.4
Net interest expense 106,224,000 86,884,000 22.3
Net foreign exchange
(gain) loss 4,959,000 10,231,000 (51.5)
(Income) from TAP
Pharmaceutical Products
Inc. joint venture (114,084,000) (121,469,000) (6.1)
Other (income) expense,
net 36,036,000 (12,797,000) n/m 1)
Earnings before taxes 893,419,000 726,317,000 23.0
Taxes on earnings 176,414,000 10,475,000 n/m 2)
Net Earnings $717,005,000 $715,842,000 0.2
Net Earnings Excluding
Specified Items, as
described below $1,046,437,000 $898,838,000 16.4 3)
Diluted Earnings Per
Common Share $0.46 $0.46 --
Diluted Earnings Per
Common Share, Excluding
Specified Items, as
described below $0.67 $0.58 15.5 3)
Average Number of Common
Shares Outstanding Plus
Dilutive Common Stock
Options and Awards 1,557,758,000 1,541,988,000
1) Other (income) expense, net in 2007 and 2006 is primarily associated
with adjustments related to Abbott's ownership of Boston Scientific
stock. These items have been reflected as specified items in both
periods as discussed in Q&A Answer 6.
2) 2006 Taxes on earnings includes a favorable adjustment to tax
expense of $132 million, or $0.09 per share, as a result of the
resolution of prior years' tax audits, which was classified as a
specified item and excluded from ongoing results.
3) 2007 Net Earnings Excluding Specified Items excludes after-tax
charges of $111 million, or $0.07 per share, for a contract
termination and other litigation, $79 million, or $0.05 per share,
for reestablishment of suspended depreciation and amortization
expense on the long-term assets of the core laboratory diagnostics
business, $52 million, or $0.03 per share, for acquisition
integration, $21 million, or $0.01 per share, for fair value loss
adjustments related to Boston Scientific stock, and $66 million, or
$0.05 per share, for cost reduction initiatives and other.
2006 Net Earnings Excluding Specified Items excludes after-tax
charges of $133 million, or $0.09 per share, for acquired in-process
research and development related to the Guidant acquisition, $69
million, or $0.05 per share for costs associated with Abbott's
decision to discontinue the commercial development of the ZoMaxx
drug-eluting stent, $53 million or $0.03 per share, for a
philanthropic contribution to the Abbott Fund, $52 million, or $0.03
per share, for acquisition integration and $25 million, or $0.02 per
share, for cost reduction/integration activities and other. These
specified items were partially offset by an after-tax gain of ($17
million), or ($0.01) per share, for a fair-value adjustment for the
gain-sharing aspect of the Boston Scientific stock purchase and a
favorable adjustment to tax expense of ($132 million), or ($0.09)
per share, as a result of the resolution of the prior years' tax
audits.
NOTE: See attached questions and answers section for further explanation of Consolidated Statement of Earnings line items.
n/m = Percent change is not meaningful.
Abbott Laboratories and Subsidiaries
Consolidated Statement of Earnings
Nine Months Ended September 30, 2007 and 2006
(unaudited)
Percent
2007 2006 Change
Net Sales $18,692,887,000 $16,258,353,000 15.0
Cost of products sold 8,260,366,000 6,949,535,000 18.9
Research and
development 1,843,248,000 1,659,104,000 11.1
Acquired in-process
and collaborations
research and development --- 707,000,000 n/m
Selling, general and
administrative 5,528,729,000 4,646,573,000 19.0
Total Operating Cost
and Expenses 15,632,343,000 13,962,212,000 12.0
Operating earnings 3,060,544,000 2,296,141,000 33.3
Net interest expense 355,245,000 203,086,000 74.9
Net foreign exchange
(gain) loss 16,058,000 17,638,000 (9.0)
(Income) from TAP
Pharmaceutical Products
Inc. joint venture (376,442,000) (357,283,000) 5.4
Other (income)
expense, net 78,960,000 (85,770,000) n/m 1)
Earnings before taxes 2,986,723,000 2,518,470,000 18.6
Taxes on earnings 583,436,000 325,501,000 79.2
Net Earnings $2,403,287,000 $2,192,969,000 9.6
Net Earnings Excluding
Specified Items, as
described below $2,976,580,000 $2,727,860,000 9.1 2)
Diluted Earnings Per
Common Share $1.54 $1.43 7.7
Diluted Earnings Per
Common Share, Excluding
Specified Items, as
described below $1.91 $1.77 7.9 2)
Average Number of Common
Shares Outstanding Plus
Dilutive Common Stock
Options and Awards 1,559,074,000 1,537,780,000
1) Other (income) expense, net in 2007 and 2006 is primarily associated
with adjustments related to Abbott's ownership of Boston Scientific
(BSX) stock. 2007 also includes realized gains on the sales of the
BSX stock. These items have been reflected as specified items in
both periods.
2) 2007 Net Earnings Excluding Specified Items excludes after-tax
charges of $164 million, or $0.11 per share, for acquisition
integration, $111 million, or $0.07 per share, for a contract
termination and other litigation, $41 million, or $0.03 per share,
for fair value loss adjustments, net of realized gains, related to
Boston Scientific stock, $34 million, or $0.02 per share, for
write-down of Omnicef inventory, $19 million, or $0.01 per share,
for transaction and separation costs relating to the terminated sale
of the core laboratory diagnostics business, and $204 million, or
$0.13 per share, for cost reduction initiatives and other.
2006 Net Earnings Excluding Specified Items excludes after-tax
charges of $438 million, or $0.29 per share, for acquired in-process
and collaborations research and development, $69 million, or $0.05
per share, for costs associated with Abbott's decision to
discontinue the commercial development of the ZoMaxx drug-eluting
stent, $53 million or $0.03 per share, for a philanthropic
contribution to the Abbott Fund and $178 million, or $0.12 per
share, for cost reduction/integration activities and other,
primarily related to the Guidant acquisition. These specified items
were partially offset by an after-tax gain of ($71 million), or
($0.05) per share for fair-value adjustments for the gain-sharing
aspect of the Boston Scientific stock purchase and a favorable
adjustment to tax expense of ($132 million), or ($0.09) per share,
as a result of the resolution of prior years' tax audits.
NOTE: See attached questions and answers section for further explanation of Consolidated Statement of Earnings line items.
n/m = Percent change is not meaningful.
Questions & Answers
Q1) What drove the 19.6 percent worldwide pharmaceutical sales growth?
A1) U.S. pharmaceutical sales growth of 17.5 percent was led by TriCor,
Niaspan and HUMIRA, which increased 40.0 percent. HUMIRA
prescription trends are growing at nearly twice the rate of the
self-injectable biologics market, as HUMIRA continues to gain share
across rheumatology, dermatology and gastroenterology market
segments. The Crohn's launch is proceeding ahead of schedule, with
HUMIRA market share exceeding 30 percent in just six months since
launch. As a result, Abbott estimates 2007 full-year global HUMIRA
sales of $3 billion. Abbott's lipid franchise also had a strong
quarter, with TriCor sales increasing 12.8 percent and Niaspan
contributing $167 million in sales.
International pharmaceutical sales increased 22.2 percent during the
quarter, including a 6.5 percent favorable impact from exchange.
International growth was driven by HUMIRA, which grew 59.6 percent,
and Kaletra, which grew 28.8 percent, based on the continued
strength of the international launch of Kaletra Tablets.
Q2) What drove the 15.6 percent increase in international nutritionals?
What drove the 12.0 percent increase in worldwide medical products
sales?
A2) Global Nutritional sales performance was led by 15.6 percent growth
in International nutritionals, with particularly strong growth in
Latin American and Asian markets. Partially offsetting this growth
was an expected decline in U.S. nutritional sales, consistent with
previous forecasts and reflecting the completion of the co-promotion
of Synagis in the United States during 2006. Excluding the impact of
Synagis, U.S. nutritional sales increased 6.9 percent, driven by
14.2 percent growth in pediatric nutritional sales.
Medical products sales growth of 12.0 percent was led by global
Diabetes Care sales, which increased 13.8 percent, 10.0 percent in
the United States, driven by the successful launch of Abbott's
next-generation FreeStyle Lite blood glucose meter. In addition, the
core laboratory diagnostics business performed well with sales of
immunochemistry and hematology products up 9.2 percent and point of
care sales up 21.6 percent. Abbott Vascular achieved sales of more
than $400 million, up nearly 15 percent in the first full quarter
with Guidant sales in both periods. This performance was driven by
international sales of Xience V and continued growth in bare metal
stents, partially offset by other coronary sales, reflecting lower
third-party catheter sales.
Q3) What drove increased investment spending in the quarter?
A3) The company remains on track for a record number of major new
product launches and regulatory submissions supported by continued
strong investment spending in R&D and SG&A this quarter and year to
date.
R&D investment reflects continuing progress in our pharmaceutical
and medical products pipelines, including new HUMIRA indications,
ABT-335, ABT-335/Crestor fixed-dose combination, ABT-874,
controlled-release Vicodin and Xience V, as well as several
promising Phase I and Phase II clinical programs in neuroscience and
oncology. SG&A expense included new and ongoing promotional
initiatives, including the launch of the Crohn's indication for
HUMIRA, and the international launch of Xience V.
Q4) How does the third-quarter gross margin profile compare to the prior
year?
A4) The gross margin ratio before and after specified items is shown
below (dollars in millions):
3Q07 3Q06
Cost of Gross Cost of Gross
Products Gross Margin Products Gross Margin
Sold Margin % Sold Margin %
As reported $2,864 $3,513 55.1% $2,391 $3,183 57.1%
Adjusted for specified items:
Reestablishment of
depreciation and
amortization expense
(Diagnostics) ($83) $83 1.3% - - -
Product discontinuation - - - ($44) $44 0.9%
Cost reduction initiatives
and other ($67) $67 1.0% ($21) $21 0.3%
Acquisition integration ($20) $20 0.3% ($21) $21 0.3%
As adjusted $2,694 $3,683 57.7% $2,305 $3,269 58.6%
The third-quarter 2007 adjusted gross margin ratio was 57.7 percent.
The comparison to 2006 was favorably impacted by improved product
mix, offset by the reduction in the contribution from Synagis in the
United States and generic competition for Omnicef.
Q5) Why did Net Interest Expense increase from the prior year?
A5) Net Interest Expense increased over the prior year primarily as a
result of debt related to the Guidant Vascular and Kos
Pharmaceuticals acquisitions.
Q6) How did specified items affect reported results?
A6) Specified items impacted third-quarter results as follows (dollars
in millions, except earnings-per-share data):
3Q07 3Q06
Earnings Earnings
After- After-
Pre-tax tax EPS Pre-tax tax EPS
As reported $893 $717 $0.46 $726 $716 $0.46
Adjusted for specified
items:
Acquired in-process R&D - - - $214 $133 $0.09
Reestablishment of
depreciation and
amortization expense
(Diagnostics) $99 $79 $0.05 - - -
Contract termination/other
litigation $116 $111 $0.07 - - -
Acquisition integration $63 $52 $0.03 $69 $52 $0.03
Fair-value adjustments for
BSX stock and gain on
financial instruments $34 $21 $0.01 ($23) ($17) ($0.01)
Philanthropic contribution - - - $70 $53 $0.03
Product discontinuation - - - $90 $69 $0.05
Tax audit resolution - - - - ($132) ($0.09)
Cost reduction initiatives
and other $81 $66 $0.05 $33 $25 $0.02
As adjusted $1,286 $1,046 $0.67 $1,179 $899 $0.58
The reestablishment of depreciation and amortization expense relates
to the core laboratory diagnostics business. As discussed last
quarter, under GAAP, once a decision to divest a business has been
reached and the business is classified as Discontinued Operations,
depreciation and amortization expense on the related long-term
assets is suspended. The proposed diagnostic divestiture was treated
this way in the first half of 2007. Since the business was
subsequently reclassified to Continuing Operations from Discontinued
Operations, cumulative depreciation and amortization expense
previously suspended must be recorded. As a result, the after-tax
impact of suspended depreciation and amortization expense from the
first-half 2007 of $79 million, or $0.05 per share, was recorded in
the third quarter and treated as a specified item. This fully
offsets the favorability of this item in the first half, resulting
in no impact for the full year.
The other third-quarter 2007 specified items are primarily related
to integration costs associated with 2006 acquisitions and
continuing cost reduction initiatives in global manufacturing
operations. Also included in specified items are expenses associated
with a contract termination, as noted in the second-quarter 10-Q,
and other litigation. As in prior quarters, specified items include
a fair-value adjustment for the Boston Scientific (BSX) stock. In
accordance with accounting standard SFAS 159, changes to the fair
value of the BSX investment are required to be reflected in the
income statement, which is tracked as a specified item, along with
any related realized gains/losses on disposition of this stock.
The pre-tax impact of the specified items by Consolidated Statement
of Earnings line item is as follows (dollars in millions):
3Q07
Cost of Other
Products (Income)/
Sold R&D SG&A Expense
As reported $2,864 $641 $1,945 $36
Adjusted for specified items:
Reestablishment of depreciation and
amortization expense (Diagnostics) $83 $8 $8 -
Contract termination/other litigation - - $116 -
Acquisition integration $20 $6 $37 -
Fair-value adjustments for BSX
stock - - - $34
Cost reduction initiatives and other $67 ($7) $21 -
As adjusted $2,694 $634 $1,763 $2
Q7) What was the tax rate in the quarter?
A7) In line with the previous forecast, the tax rate this quarter,
excluding specified items, was 18.6 percent. As a result, the tax
rate year-to-date, excluding specified items, is 19.5 percent,
consistent with the full-year guidance previously provided.
Q8) How did the TAP joint venture perform this quarter?
A8) Income from the TAP joint venture was in line with previous
forecasts. Prevacid sales were $566 million and Lupron sales were
$152 million.
Q9) What are some near-term opportunities in Abbott's broad-based
pipeline?
A9) Abbott is making significant progress across a number of late-stage
programs in its broad-based pharmaceutical and medical products
pipeline, including:
* HUMIRA
o Crohn's disease -- Launched in the United States and
Europe in the first half of this year.
o Psoriasis -- Submitted for global regulatory approval,
expect to launch first-quarter 2008.
o Juvenile RA -- Submitted for global regulatory approval,
expect to launch in early 2008.
o Ulcerative colitis -- Entered into Phase III development
in 2006.
* Xience V Drug-Eluting Stent (DES) -- In May, Abbott submitted
the final module of its FDA application for U.S. approval and
we continue to expect a U.S. launch in the first half of 2008.
We continue to work toward a Nov. 29 date for the Xience V
advisory panel meeting. As a reminder, Xience V was launched
internationally in 2006. At the Transcatheter Cardiovascular
Therapeutics (TCT) meeting next week, Abbott will present new
data from the Xience V clinical program. Abbott will host an
investor meeting at TCT on October 23.
* Controlled-release Vicodin -- A controlled-release form of
Abbott's pain brand, Vicodin, is currently in Phase III
development. Abbott plans to submit for regulatory approval in
the fourth quarter of this year.
* Simcor -- Abbott has submitted its regulatory application for
Simcor, a combination therapy to address both HDL and LDL
cholesterol, and expects to launch early next year. Phase III
Simcor data will be presented at the American Heart Association
meeting in November.
* ABT-335 -- Abbott's next-generation fenofibrate is currently in
Phase III development as a stand-alone therapy. A U.S.
regulatory submission is expected in the fourth-quarter 2007.
* ABT-335/Crestor (ABT-143) -- Abbott and AstraZeneca recently
chose to advance ABT-335 in its fixed-dose combination with
Crestor to address all three lipid parameters in a single pill.
This program is on track for a regulatory submission in 2009.
* ABT-874 -- In immunology, Abbott's anti-IL-12/23 biologic,
ABT-874, has demonstrated promising results in early studies
for Crohn's disease and psoriasis. The company plans to move
ABT-874 into Phase III development for psoriasis before
year-end.
* Flutiform -- A combination asthma treatment in Phase III
development by SkyePharma. Flutiform is expected to launch in
2009 and Abbott will handle promotion in the United States.
* Diabetes Care Pipeline -- Abbott's FreeStyle Navigator
Continuous Glucose Monitoring System was recently launched in
Europe and is under active U.S. FDA review. Also in development
is a fully integrated blood glucose monitoring system combining
a meter, test strips and lancing capabilities in one device.
* m2000 Molecular Diagnostics System -- In May, Abbott received
FDA approval for the RealTime HIV-1 viral load test for use on
the m2000 molecular diagnostics system. Abbott expects to
expand its menu of infectious disease assays over the next few
years.
* Abbott PRISM -- In July, Abbott received FDA approval for its
hepatitis C (HCV) test for use on the Abbott PRISM diagnostics
system. This approval completes the PRISM hepatitis panel,
which also includes three additional hepatitis B tests.
Additional retrovirus screening tests for use on Abbott PRISM
are currently under FDA review.
Q10) What are some mid- and early-stage opportunities in Abbott's broad-
based pipeline?
A10) Abbott is advancing leading-edge scientific discoveries in its mid-
and early-stage pharmaceutical and medical products pipeline.
Following are selected highlights:
* Oncology
o In the second quarter, Abbott announced a collaboration
with Genentech to develop and commercialize two Abbott
oncology compounds. Developed by Abbott scientists,
ABT-869, a multi-targeted kinase inhibitor and ABT-263, a
Bcl-2 protein antagonist, represent promising, unique
approaches to treating cancer. Abbott and Genentech will
work together on all aspects of research, development and
commercialization.
o Additional oncology compounds in Abbott's pipeline that
are not part of the collaboration include: ABT-888, a
PARP-inhibitor, which prevents DNA repair in cancer cells,
enhancing the effectiveness of current cancer therapies;
ABT-751, an oral anti-mitotic in Phase II for non-small
cell lung cancer and neuroblastoma; and, ABT-828, a
biologic anti-tumor agent with a novel mechanism of
action.
* Neuroscience
o Abbott's neuroscience pipeline includes several unique
approaches for treating a number of diseases including
schizophrenia, ADHD, Alzheimer's disease and pain.
Compounds under development include neuronal nicotinic
receptor agonists (NNR's) and dopamine 3 (D3) receptor
antagonists, both of which play a role in regulating pain,
memory and other neurological functions.
o Abbott's neuroscience pipeline includes ABT-089 and
ABT-894, two NNRs in Phase II, ABT-925, a D3 receptor
antagonist in Phase II, and several compounds in earlier
stage development.
* Hepatitis C
o Abbott has partnered with Enanta Pharmaceuticals to
develop protease inhibitors for the treatment of hepatitis
C (HCV), which affects more than 170 million people
worldwide. Abbott also has an internal HCV polymerase
program in early-stage development.
* Bioabsorbable Drug-Eluting Stent
o Abbott has presented encouraging data from the world's
first clinical trial (ABSORB) for a fully-bioabsorbable
drug-eluting stent (DES) to treat coronary artery disease.
Abbott will present one-year data from the ABSORB trial
next week at TCT. The bioabsorbable DES is designed to be
slowly and completely metabolized by the body over time.
Website: http://www.abbott.com// |
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