Company overview - Abbott Laboratories is engaged in the discovery, development, manufacture and sale of a range of healthcare products. The Company operates through four segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products and Vascular Products. Its Established Pharmaceutical Products include a range of branded generic pharmaceuticals manufactured around the world and marketed and sold outside the United States. Its Diagnostic Products include a range of diagnostic systems and tests. Its Nutritional Products include a range of pediatric and adult nutritional products. Its Company's Vascular Products include a range of coronary, endovascular, vessel closure and structural heart devices for the treatment of vascular disease. The Company, through St. Jude Medical, Inc., also offers products, such as rhythm management products, electrophysiology products, heart failure related products, vascular products, structural heart products and neuromodulation products.


ABT Details

Continue to deliver solid results: Abbott Laboratories (NYSE: ABT) has reported a strong Q2FY17 with 24.4% yoy growth in worldwide sales at $6.6 billion on a reported basis, led by the integration of the $25 billion St. Jude acquisition. On a comparable operational basis, worldwide sales increased 2.9%, and sales growth in the quarter was impacted by purchasing patterns associated with the implementation of a new Goods and Services Tax (GST) system in India. Excluding the transitory impact, which primarily impacted Established Pharmaceuticals, total Abbott sales would have grown 25.3% on a reported basis and 3.7% on a comparable operational basis in the second quarter. The company has raised its full-year 2017 EPS guidance range from continuing operations on a GAAP basis of $1.03 to $1.13, while the projected full-year adjusted diluted EPS from continuing operations is now $2.43 to $2.53.


Q2FY17 sales summary; (Source: Company reports)

Product milestones during the quarter: In diagnostics business, the company launched the Alinity hq hematology system in Europe to help improve lab efficiencies for customers, and it is the fifth new Abbott diagnostic system launched in Europe since November 2016. Medical Devices sales growth was led by robust performance in Electrophysiology, Neuromodulation, Structural Heart and Diabetes. Currently, it holds the first position in the fast-growing neuromodulation market for treating chronic pain through spinal stimulation. Abbott has one of the strongest pipelines in health care, spanning transformational medical technologies that are changing the way doctors manage some of the world's most pressing health concerns. Some of other important product milestones in the quarter include, the Confirm RXTM Insertable Cardiac Monitor (ICM), which helps physicians remotely diagnose and treat difficult to detect irregular heartbeats (cardiac arrhythmias), received CE Mark in Europe. Further, FreeStyle® Libre, Abbott's revolutionary continuous glucose monitoring system received Canadian approval. Abbott submitted the Quadra Assura Cardiac Resynchronization Therapy Defibrillator (CRT-D) to the FDA for MRI-conditional labeling to allow heart failure patients to undergo full body magnetic resonance imaging (MRI) scans, if required.


Segment sales; (Source: Company reports)
 
Initiates clinical trial of three-month dual antiplatelet therapy: Abbott announced that the first patient has been enrolled in a clinical study evaluating the short-term use of common blood thinning medicines, called dual antiplatelet therapy (DAPT), after receiving a XIENCE everolimus-eluting coronary stent. The study, called XIENCE Short DAPT (a prospective, multi-center, open label, single-arm, non-randomized study) will evaluate if three months of DAPT is non-inferior to the current standard of 12 months after implantation with a XIENCE stent for patients who are at substantial risk of bleeding. The study will enroll approximately 2,000 patients at 100 sites in the U.S. and Asia. Blood thinning medicines are prescribed for patients after stent implantation to prevent stent thrombosis, but can increase the risk for bleeding complications, particularly for high-bleeding risk patients. Approximately 1 in 5 patients who receive stents today are considered at substantial risk of bleeding. Limiting the duration of blood thinning medicine from 12 months to three months is particularly important for people at higher risk of bleeding due to factors such as older age, anemia, and renal disease.


Stent placement; (Source: Company reports)

Collaboration with Bigfoot Biomedical to develop breakthrough diabetes technologies: Abbott and Bigfoot Biomedical have entered into an agreement to develop and commercialize diabetes management systems, integrating Abbott's FreeStyle® Libre glucose sensing technology with Bigfoot's insulin delivery solutions in the United States. As part of the agreement, Abbott will provide Bigfoot with the next generation of its FreeStyle Libre glucose sensing technology, and Bigfoot will utilize this technology in the development of the first-ever personalized, user-friendly systems intended to optimize insulin delivery without the need for fingerstick calibration of a glucose sensor.  All people with Type 1 diabetes, and nearly one third of people with Type 2 diabetes, must inject insulin to manage their glucose – that's more than 6 million people in the U.S. alone.  Bigfoot has both injection and infusion pump-based insulin delivery systems in development. These investigational systems utilize intuitive design, Internet of Things connectivity, smartphone technology and machine learning automation to adjust insulin delivery or dosing with the intent to keep glucose levels in an optimal range. Bigfoot anticipates initiating a pivotal trial incorporating FreeStyle Libre technology in 2018 at clinical research sites across the United States.


Cardiac and diabetic products under development; (Source: Company reports)

Acquisition of St. Jude Medical to diversify the product portfolio: On January 4, 2017, Abbott completed the acquisition of St. Jude Medical, a global medical device manufacturer, for approximately $23.6 billion, including approximately $13.6 billion in cash and approximately $10 billion in Abbott common shares, which represented approximately 254 million shares of Abbott common stock. The transaction establishes Abbott as a leader in the medical device arena and provides expanded opportunities for future growth. The addition of St. Jude Medical is an important part of the company's ongoing effort to develop a strong, diverse portfolio of devices, diagnostics, nutritionals and branded generic pharmaceuticals.   The addition of St. Jude Medical creates one of the broadest medical device portfolios in the world and provides a steady stream of innovative technologies and therapies. St. Jude Medical's strong positions in fast-growing areas such as atrial fibrillation, heart failure, structural heart and chronic pain complement Abbott's leading positions in coronary interventions and mitral valve disease. Together, the company will compete in nearly every area of the $30 billion cardiovascular market and hold the No. 1 or 2 positions across large and high-growth cardiovascular device markets. Furthermore, the acquisition balances and strengthens the Abbott portfolio, which includes leading positions across all its four core businesses.


Business segments; (Source: Company reports)

Launch of the SEKISUI CP3000 fully automated coagulation system:  Recently, Abbott has launched the SEKISUI CP3000 coagulation system, a fully automated analyzer that tests bleeding and clotting function in blood, is now available in Europe, the Middle East, and Asia Pacific. Abbott is the exclusive global distributor of the CP3000 coagulation system in the U.S., Europe and other countries that recognize CE Mark and has non-exclusive distribution rights with Sekisui in China, Hong Kong, Japan and Macau. The launch of the CP3000 coagulation system is an important milestone, optimizes laboratory workflow, and expedite the time to produce accurate test results, while integrating with Abbott’s suite of informatics solutions, which help accelerate efficiency in high test volume laboratories. Capabilities like Abbott's AlinIQ informatics and service offerings streamline operations and provide intelligent laboratory insights through common reporting and dashboard views, make it easy for healthcare providers to read and interpret patient results. The system also connects to the ACCELERATOR a3600 automation track, which provides additional flexibility to meet the needs of the laboratory.


SEKISUI CP3000 coagulation system; (Source: Company reports)

FY16 earnings impacted by adverse currency fluctuations: In 2016, the company’s sales grew 2.2% globally and were up 4.8% excluding the impact of foreign exchange. The increases in total net sales in 2016 and 2015 reflect unit growth, partially offset by the impact of unfavorable foreign exchange. The price declines related to Vascular Products sales in 2016 and 2015 primarily reflect pricing pressure on drug eluting stents due to market competition in the U.S. and other major markets. Further, competitive pressures in the Managed Medicaid and Medicare segments of Abbott’s Diabetes Care business also contributed to the overall 2.9% price decline in the U.S. in 2016. Gross profit margins stood at 54.1% 2016 against 54.2% in 2015, and the unfavorable effect of foreign exchange offset continued underlying margin expansion, primarily in the Diagnostics and Nutritional segments during 2016. In turn, Net income declined by 68.3% yoy to $1.4 billion, primarily impacted by increased interest expense, other non-operating expenses and adverse forex losses.


FY16 Consolidated Income statement; (Source: Company reports)

Stock performance: The shares of Abbott have moved up 16.7% in the last one year, while it is up 23% in the last six months. Moreover, the company has a robust product line with stable dividend yield of 2.1%, Given the on-going investments in diversifying existing portfolio, and cost control measures, we give a “Buy” recommendation on the stock at the current market price of $50.40


ABT Daily chart; (Source: Thomson Reuters)

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