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Jobless rate jumps to 5-year high of 6.1 percent- The nation's unemployment rate zoomed to a five-year high of 6.1 percent in August as employers slashed 84,000 jobs, dramatic proof of the mounting damage a deeply troubled economy is inflicting on workers and businesses alike.
McCain and Obama campaigns grapple for 'change'- Invigorated by back-to-back political conventions, Republican John McCain and Democrat Barack Obama grappled for the mantle of change Friday as the fall race for the presidency took off in states teeming with the independent voters they needed to win.
US East Coast braces for Tropical Storm Hanna- Beach vacationers in the Carolinas prepared to pack up and head inland Friday as Tropical Storm Hanna cruised steadily toward the coast, while others decided to ride out the fast-moving storm that had only a slight chance to become a small hurricane before crashing ashore overnight.
US warship at Georgian port partly held by Russia- The flagship of the U.S. Navy's Mediterranean fleet anchored outside a key Georgian port Friday, defiantly bringing in tons of humanitarian aid to a city still partly occupied by hundreds of Russian troops.
Rice arrives in Libya on historic visit
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- Secretary of State Condoleezza Rice said Friday that her historic visit to former pariah state Libya proves that the United States never writes off another nation forever.
Bush to announce US troop levels in Iraq next week
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'Broken man' Abramoff gets 4 years in prison- Broken and disgraced, lobbyist Jack Abramoff will spend four years in prison for his role in a corruption scandal that upended Washington politics and contributed to the Republicans' loss of Congress in 2006.
Rangel paid no mortgage interest on beach house
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Gene domino effect behind brain, pancreatic tumors
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Abbott Reports Stronger-than-Expected Sales and Earnings Growth in Second Quarter and Raises Full-Year Outlook
ABBOTT PARK, Ill.
(Map)
-
* Diluted earnings per share, excluding specified items, were $0.84,
above Abbott's previously announced guidance range of $0.78 to $0.80,
reflecting 21.7 percent growth. Diluted earnings per share under
Generally Accepted Accounting Principles (GAAP) were $0.85, up 34.9
percent. This outperformance was driven by higher sales performance
across the company, an improved gross margin, and higher ongoing
income related to the recently concluded TAP joint venture.
* Worldwide sales increased 14.8 percent to $7.3 billion, including a
favorable 5.9 percent effect of exchange rates.
* Worldwide pharmaceutical sales increased 16.7 percent driven by
double-digit growth in HUMIRA(R), Niaspan(R) and Kaletra(R). Today,
Abbott is raising its forecast for global HUMIRA sales to more than
$4.3 billion in 2008.
* Worldwide medical products sales increased 14.7 percent, driven by
17.2 percent growth in global diagnostics sales, and 15.7 percent
growth in global vascular sales.
* Worldwide nutritional products sales growth was led by 21.3 percent
growth in international nutritionals, with continued strong
performance in emerging markets.
* Year-to-date, Abbott has received eight major regulatory approvals,
including the XIENCE V(TM) drug-eluting stent.
"Abbott achieved another quarter of strong performance across our diverse
mix of global businesses, with particularly strong results internationally,"
said
The following is a summary of second-quarter 2008 sales.
Sales Summary - Impact of
Quarter Ended 6/30/08 2Q08 % Change Exchange on
($ millions) vs. 2Q07 % Change
Total Sales $7,314 14.8 5.9
Total U.S. Sales $3,410 5.7 ---
Total International Sales $3,904 24.1 12.0
Worldwide Pharmaceutical Sales $4,123 16.7 (a) 6.0
U.S. Pharmaceuticals $2,070 8.2 (a) ---
International Pharmaceuticals $2,053 26.8 (a) 13.2
Worldwide Nutritional Sales $1,235 12.6 (b) 3.6
U.S. Nutritionals $608 4.7 ---
International Nutritionals $627 21.3 7.7
Worldwide Diagnostics Sales $936 17.2 (b) 9.2
U.S. Diagnostics $227 10.6 ---
International Diagnostics $709 19.4 12.3
Worldwide Vascular Sales $490 15.7 (b) 6.4
U.S. Vascular $218 (2.1) ---
International Vascular $272 35.4 13.5
Other Sales $530 2.2 4.7
(a) See Q&A answer 1 for discussion of pharmaceutical sales growth.
(b) See Q&A answer 2 for discussion of worldwide nutritional, diagnostic
and vascular sales.
Note: See "Consolidated Statement of Earnings" for more information.
The following is a summary of first-half 2008 sales.
Sales Summary - Impact of
First-Half Ended 6/30/08 1H08 % Change Exchange on
($ millions) vs. 1H07 % Change
Total Sales $14,080 14.3 5.7
Total U.S. Sales $6,452 4.8 ---
Total International Sales $7,628 23.9 11.5
Worldwide Pharmaceutical Sales $7,978 15.5 6.0
U.S. Pharmaceuticals $3,822 6.0 ---
International Pharmaceuticals $4,156 25.9 12.5
Worldwide Nutritional Sales $2,344 11.7 3.3
U.S. Nutritionals $1,190 3.9 ---
International Nutritionals $1,154 21.1 7.4
Worldwide Diagnostics Sales $1,768 17.1 8.7
U.S. Diagnostics $437 7.6 ---
International Diagnostics $1,331 20.6 11.8
Worldwide Vascular Sales $941 11.6 5.6
U.S. Vascular $432 (7.3) ---
International Vascular $509 35.1 12.6
Other Sales $1,049 9.1 4.7
Note: See "Consolidated Statement of Earnings" for more information.
The following is a summary of Abbott's second-quarter 2008 sales for
selected products.
Quarter Ended 6/30/08 Percent Percent Percent
(dollars in millions) Change Rest Change Change
U.S. vs. of vs. Global vs.
Sales 2Q07 World 2Q07 Sales 2Q07
Pharmaceutical Products
HUMIRA $526 29.3 $563 71.3 (a) $1,089 48.1
Depakote $387 1.2 $27 22.9 $414 2.4
Kaletra $120 (8.8) $235 28.1 (b) $355 12.7
TriCor $307 1.7 --- --- $307 1.7
Ultane/Sevorane $44 (16.5) $158 9.7 (c) $202 2.7
Niaspan $194 13.9 --- --- $194 13.9
Biaxin (clarithromycin) $1 n/m $158 (4.5)(d) $159 (6.1)
Lupron $81 n/m $73 12.3 (e) $154 n/m
Synthroid $115 11.5 $23 29.6 $138 14.2
Nutritional Products
Pediatric Nutritionals $311 6.9 $341 20.6 (f) $652 13.6
Adult Nutritionals $291 2.8 $286 22.2 (g) $577 11.6
Medical Products
Abbott Diabetes Care $134 (5.4) $202 21.9 (h) $336 9.3
Coronary Stents $79 4.6 $138 51.1 (i) $217 30.1
Other Coronary $77 (1.3) $91 18.3 (j) $168 8.4
Endovascular $62 (10.3) $43 31.7 (k) $105 3.3
(a) Without the positive impact of exchange of 19.8 percent, HUMIRA sales
increased 51.5 percent internationally.
(b) Without the positive impact of exchange of 12.6 percent, Kaletra sales
increased 15.5 percent internationally.
(c) Without the positive impact of exchange of 9.9 percent, Sevorane sales
decreased 0.2 percent internationally.
(d) Without the positive impact of exchange of 10.0 percent,
clarithromycin sales decreased 14.5 percent internationally.
(e) Without the positive impact of exchange of 11.7 percent, Lupron sales
increased 0.6 percent internationally.
(f) Without the positive impact of exchange of 6.6 percent, Pediatric
Nutritionals sales increased 14.0 percent internationally.
(g) Without the positive impact of exchange of 9.2 percent, Adult
Nutritionals sales increased 13.0 percent internationally.
(h) Without the positive impact of exchange of 13.5 percent, Abbott
Diabetes Care sales increased 8.4 percent internationally.
(i) Without the positive impact of exchange of 15.0 percent, Coronary
Stent sales increased 36.1 percent internationally.
(j) Without the positive impact of exchange of 11.6 percent, Other
Coronary sales increased 6.7 percent internationally.
(k) Without the positive impact of exchange of 13.8 percent, Endovascular
sales increased 17.9 percent internationally.
n/m = Not meaningful
The following is a summary of Abbott's first-half 2008 sales for selected products.
First-Half Ended 6/30/08 Percent Percent Percent
(dollars in millions) Change Change Change
U.S. vs. Rest of vs. Global vs.
Sales 1H07 World 1H07 Sales 1H07
Pharmaceutical Products
HUMIRA $927 33.2 $1,039 70.2 (a) $1,966 50.5
Depakote $727 5.9 $51 17.6 $778 6.6
Kaletra $234 (6.1) $475 29.7 (b) $709 15.2
TriCor $553 5.1 --- --- $553 5.1
Ultane/Sevorane $88 (12.9) $301 11.6 (c) $389 4.9
Biaxin (clarithromycin) $7 n/m $374 (2.2)(d) $381 (3.2)
Niaspan $370 18.6 --- --- $370 18.6
Synthroid $208 (3.0) $45 28.9 $253 1.4
Lupron $81 n/m $137 13.5 (e) $218 n/m
Nutritional Products
Pediatric Nutritionals $616 5.7 $634 22.9 (f) $1,250 13.8
Adult Nutritionals $562 3.3 $520 18.9 (g) $1,082 10.3
Medical Products
Abbott Diabetes Care $271 (1.0) $391 22.5 (h) $662 11.7
Coronary Stents $154 (4.1) $252 51.8 (i) $406 24.3
Other Coronary $156 (7.2) $177 19.0 (j) $333 5.1
Endovascular $122 (11.1) $80 28.9 (k) $202 1.4
(a) Without the positive impact of exchange of 18.7 percent, HUMIRA sales
increased 51.5 percent internationally.
(b) Without the positive impact of exchange of 11.5 percent, Kaletra sales
increased 18.2 percent internationally.
(c) Without the positive impact of exchange of 9.7 percent, Sevorane sales
increased 1.9 percent internationally.
(d) Without the positive impact of exchange of 9.8 percent, clarithromycin
sales decreased 12.0 percent internationally.
(e) Without the positive impact of exchange of 11.9 percent, Lupron sales
increased 1.6 percent internationally.
(f) Without the positive impact of exchange of 6.0 percent, Pediatric
Nutritionals sales increased 16.9 percent internationally.
(g) Without the positive impact of exchange of 9.0 percent, Adult
Nutritionals sales increased 9.9 percent internationally.
(h) Without the positive impact of exchange of 12.9 percent, Abbott
Diabetes Care sales increased 9.6 percent internationally.
(i) Without the positive impact of exchange of 14.2 percent, Coronary
Stents sales increased 37.6 percent internationally.
(j) Without the positive impact of exchange of 10.7 percent, Other
Coronary sales increased 8.3 percent internationally.
(k) Without the positive impact of exchange of 13.1 percent, Endovascular
sales increased 15.8 percent internationally.
n/m = Not meaningful
Business Highlights
* XIENCE V(TM) Approved in United States -- On July 2, received U.S.
Food and Drug Administration (FDA) approval and launched XIENCE V,
the only drug-eluting stent to demonstrate superiority over the
market-leading stent in two randomized, controlled clinical trials.
Abbott's application included safety and efficacy data from the
XIENCE V SPIRIT family of clinical trials, which met their primary
endpoints and demonstrated superiority of XIENCE V over TAXUS(R).
* XIENCE V Submitted in Japan -- In June, submitted a marketing
authorization license application in Japan to gain approval for
XIENCE V to treat coronary artery disease. The application for XIENCE
V consisted of safety and efficacy data from the SPIRIT III clinical
trial, including data from a Japanese patient population.
* HUMIRA(R) Data -- In June, announced new HUMIRA data across the full
suite of rheumatic disease indications demonstrating HUMIRA's proven
durability of response. Seven-year data from open label extension
studies show treatment with HUMIRA resulted in clinical remission
among long-standing rheumatoid arthritis patients when used in
combination with methotrexate. Additionally, results from an analysis
of three open label studies demonstrated HUMIRA's efficacy across all
three rheumatic disease states in patients with a previous inadequate
response to other anti-TNF therapies, infliximab and etanercept.
* TriLipix(TM) / CRESTOR(R) Data Presented -- In May, New Phase III
data showed that in patients with multiple lipid problems, Abbott's
next generation fenofibrate therapy, TriLipix, combined with
AstraZeneca's CRESTOR, led to greater improvements than the
monotherapy in treating all three key lipids -- LDL "bad"
cholesterol, HDL "good" cholesterol and triglycerides.
* Vicodin CR(TM) Meets Primary Efficacy Endpoints in Phase III Trial --
In May, new Phase III study data showed that Vicodin CR, a
controlled-release form of the established brand, reduced pain in
patients with moderate-to-severe chronic low back pain. Taken twice
daily in the clinical trial, Vicodin CR significantly lowered chronic
low back pain intensity with 12-hour dosing versus placebo. Current
forms of Vicodin must be taken every four to six hours throughout the
day.
* SPIRIT III Data Presented at EuroPCR -- In May, two-year data
presented from the SPIRIT III trial, Abbott's U.S. pivotal trial,
demonstrated that XIENCE V continues to deliver clinically superior
benefits for patients compared to the TAXUS paclitaxel-eluting
coronary stent system.
* Launched Next-Generation StarClose(R) SE Vascular Closure System --
In May, announced the launch of the StarClose SE Vascular Closure
System, a next-generation vessel closure device engineered to enable
fast, safe and secure closure of the femoral artery access site
following a catheterization procedure. StarClose SE is available in
the U.S. and Europe.
* TAP Joint Venture Concludes -- In April, Abbott and Takeda
Pharmaceutical Company Limited concluded their TAP Pharmaceutical
Products Inc. (TAP) joint venture. Abbott and Takeda have evenly
split the value and assets of the joint venture, with Abbott
receiving full ownership of Lupron, including its U.S. commercial
organization, as well as future cash payments from Takeda over the
next five years.
Abbott raises guidance for full-year sales growth and earnings per share
Based on the company's strong performance year-to-date, and the outlook
for the remainder of the year, Abbott is raising both its sales growth and
earnings-per-share forecasts for the full-year 2008. The company is raising
its earnings-per-share guidance range for the full-year from
Abbott continues to forecast net specified items for the full-year 2008 of
Abbott forecasts net specified items for the third-quarter 2008 of
approximately
Abbott declares quarterly dividend
On
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 more than 68,000 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
second-quarter earnings conference call through its Investor Relations Web
site at http://www.abbottinvestor.com at
- 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
Abbott Laboratories and Subsidiaries
Consolidated Statement of Earnings
Second Quarter Ended June 30, 2008 and 2007
(unaudited)
Percent
2008 2007 Change
Net Sales $7,314,021,000 $6,370,620,000 14.8
Cost of products sold 3,119,700,000 2,804,326,000 11.2
Research and development 656,863,000 583,474,000 12.6
Acquired in-process research and
development 78,556,000 --- n/m
Selling, general and
administrative 2,052,317,000 1,796,456,000 14.2
Total Operating Cost and Expenses 5,907,436,000 5,184,256,000 13.9
Operating earnings 1,406,585,000 1,186,364,000 18.6
Net interest expense 83,321,000 124,816,000 (33.2)
Net foreign exchange (gain) loss 14,472,000 6,248,000 131.6
(Income) from TAP Pharmaceutical
Products Inc. joint venture (17,055,000) (115,726,000) (85.3)
Other (income) expense, net (310,471,000) (81,612,000) n/m 1)
Earnings before taxes 1,636,318,000 1,252,638,000 30.6
Taxes on earnings 314,304,000 263,894,000 19.1
Net Earnings $1,322,014,000 $988,744,000 33.7
Net Earnings Excluding Specified
Items, as described below $1,307,998,000 $1,076,035,000 21.6 2)
Diluted Earnings Per Common Share $0.85 $0.63 34.9
Diluted Earnings Per Common Share,
Excluding Specified Items, as
described below $0.84 $0.69 21.7 2)
Average Number of Common Shares
Outstanding Plus Dilutive
Common Stock Options and Awards 1,553,395,000 1,560,667,000
1) Other (income) expense, net, in 2008 includes a gain of $95 million in
connection with the closing of the TAP Pharmaceutical Products Inc.
joint venture transaction and a gain of $52 million from the sale of an
equity investment in Millennium Pharmaceuticals. These items have been
treated as specified items as discussed at Q&A answer 3. The remainder
of Other (income) expense, net, is primarily related to ongoing
contractual payments from Takeda associated with the conclusion of the
TAP joint venture. See Q&A answer 7 for further discussion. Other
(income) expense, net, in 2007 is primarily associated with Abbott's
ownership of Boston Scientific stock.
2) 2008 Net Earnings Excluding Specified Items excludes a tax-free gain of
$95 million, or $0.06 per share, recorded on the closing of the TAP
joint venture transaction, a reduction in income taxes of $30 million,
or $0.02 per share, relating to the settlement of an IRS audit, and an
after-tax gain of $40 million, or $0.03 per share, relating to the sale
of an equity investment in Millennium Pharmaceuticals. These items were
partially offset by after-tax charges of $61 million, or $0.04 per
share, for acquired in-process research and development relating to
technology investments, $45 million, or $0.03 per share, for cost
reduction initiatives, and $45 million, or $0.03 per share, for
acquisition integration, TAP separation and other. See Q&A Answer 3 for
a discussion of specified items.
2007 Net Earnings Excluding Specified Items excludes after-tax charges
of $93 million, or $0.06 per share, for acquisition integration and
other, $41 million, or $0.03 per share, for a write-down of Omnicef
inventory, and $43 million, or $0.03 per share, for cost reduction
initiatives. 2007 also excludes after-tax gains of $55 million, or
$0.04 per share, relating to adjustments in Abbott's ownership of BSX
stock and realized gains on the sales of the BSX stock, and $35
million, or $0.02 per share, relating to suspended depreciation and
amortization expense on the long-term assets of the core laboratory
diagnostics business, net of transaction and separation costs.
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
Six Months Ended June 30, 2008 and 2007
(unaudited)
Percent
2008 2007 Change
Net Sales $14,079,624,000 $12,316,181,000 14.3
Cost of products sold 6,080,772,000 5,396,337,000 12.7
Research and development 1,276,820,000 1,202,530,000 6.2
Acquired in-process research
and development 97,256,000 --- n/m
Selling, general and
administrative 4,070,350,000 3,583,325,000 13.6
Total Operating Cost and
Expenses 11,525,198,000 10,182,192,000 13.2
Operating earnings 2,554,426,000 2,133,989,000 19.7
Net interest expense 176,499,000 249,021,000 (29.1)
Net foreign exchange (gain) loss 20,693,000 11,099,000 86.4
(Income) from TAP Pharmaceutical
Products Inc. joint venture (118,997,000) (262,358,000) (54.6)
Other (income) expense, net (320,813,000) 42,924,000 n/m 1)
Earnings before taxes 2,797,044,000 2,093,303,000 33.6
Taxes on earnings 537,163,000 407,022,000 32.0
Net Earnings $2,259,881,000 $1,686,281,000 34.0
Net Earnings Excluding
Specified Items, as described
below $2,295,723,000 $1,930,142,000 18.9 2)
Diluted Earnings Per Common
Share $1.45 $1.08 34.3 2)
Diluted Earnings Per Common
Share, Excluding Specified
Items, as described below $1.47 $1.24 18.5
Average Number of Common
Shares Outstanding Plus
Dilutive Common Stock Options
and Awards 1,556,985,000 1,559,774,000
1) Other (income) expense, net, in 2008 includes a gain of $95 million in
connection with the closing of the TAP Pharmaceutical Products Inc.
joint venture transaction and gains of $63 million from the sale of
equity investments in Millennium Pharmaceuticals and Boston Scientific.
These items have been treated as specified items. The remainder of
Other (income) expense, net, is primarily related to ongoing
contractual payments from Takeda associated with the conclusion of the
TAP joint venture. Other (income) expense, net, in 2007 is primarily
associated with Abbott's ownership of Boston Scientific stock.
2) 2008 Net Earnings Excluding Specified Items excludes a tax-free gain of
$95 million, or $0.06 per share, recorded on the closing of the TAP
joint venture transaction, a reduction in income taxes of $30 million,
or $0.02 per share, relating to the settlement of an IRS audit, and an
after-tax gain of $49 million, or $0.03 per share, relating to sales of
equity investments in Millennium Pharmaceuticals and Boston Scientific.
These items were offset by after-tax charges of $76 million, or $0.05
per share, for acquired in-process research and development relating to
technology investments, $75 million, or $0.05 per share, for cost
reduction initiatives, and $59 million, or $0.03 per share for
acquisition integration, TAP separation and other.
2007 Net Earnings Excluding Specified Items excludes after-tax charges
of $192 million, or $0.12 per share, for acquisition integration and
other, $56 million, or $0.04 per share, for cost reduction initiatives,
$41 million, or $0.03 per share, for a write-down of Omnicef inventory,
$20 million, or $0.01 per share, for fair value adjustments to BSX
stock, net of gains on the sales of the stock, and $14 million, or
$0.01 per share, for transaction and separation costs relating to the
terminated sale of the core laboratory diagnostics business. 2007 also
excludes an after-tax benefit of $79 million, or $0.05 per share,
relating to suspended depreciation and amortization expense on the
long-term assets of the core laboratory diagnostics business.
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 16.7 percent worldwide pharmaceutical sales growth in
the quarter and what is the outlook for the second half of 2008?
A1) International pharmaceutical sales increased 26.8 percent during the
quarter, including a 13.2 percent favorable impact from exchange.
Better-than-expected international growth was driven by
HUMIRA, which increased 71.3 percent, and Kaletra, which grew
28.1 percent. Sevorane and Lupron also contributed to reported
international growth, as well as a number of other established
products that performed well.
U.S. pharmaceutical sales this quarter increased 8.2 percent,
reflecting strong double-digit growth for HUMIRA, Niaspan and
Synthroid. Partially offsetting this performance was the negative
impact of generic competition for Omnicef as well as modestly lower
wholesaler buying in the quarter. U.S. pharmaceutical growth was
also affected by lower-than-forecasted Lupron sales due to the
commercial transition of the product from our previous TAP joint
venture to Abbott. We continue to forecast Lupron sales approaching
$400 million in 2008.
Also in the quarter, Niaspan performed well with sales of
$194 million, up 13.9 percent. Abbott's total lipid franchise growth
continues to outpace that of the total cholesterol market, which is
growing in the low single digits. Synthroid sales in the quarter
were $115 million, up 11.5 percent. U.S. HUMIRA sales increased
nearly 30 percent, as strong market demand continued across the
three major market segments of rheumatology, gastroenterology and
dermatology. As a result of expected continued strong global demand
for HUMIRA, Abbott is raising its forecast for global HUMIRA sales
to more than $4.3 billion in 2008.
For the third and fourth quarters of 2008, we expect double-digit
sales growth for both our U.S. and international pharmaceutical
businesses.
Q2) What drove the 14.7 percent increase in worldwide medical products
sales and strong international nutritional products sales? What is
the outlook for the second half of 2008?
A2) Medical products sales growth of 14.7 percent was driven by a 17.2
percent increase in global diagnostics sales and 15.7 percent growth
in worldwide vascular. All of our diagnostic businesses --
molecular, point of care, and our core business -- experienced
double-digit growth. In the quarter, Abbott Vascular achieved sales
of $490 million, driven by drug-eluting stent (DES) franchise sales,
which more than doubled from the prior year quarter. We continue to
see improvement in the U.S. percutaneous coronary intervention (PCI)
market, with PCI volumes up sequentially from the first quarter 2008
and DES penetration in the high-60 percent range.
Worldwide nutritional products sales were led by 21.3 percent growth
in international nutritionals, including a 7.7 percent favorable
impact from exchange, with continued strong growth in emerging
markets, including Latin America and Asia.
For the third and fourth quarters of 2008, we expect double-digit
sales growth for both worldwide medical products and worldwide
nutritional products.
Q3) How did specified items affect reported results?
A3) Specified items impacted second-quarter results as follows:
(dollars in millions, 2Q08 2Q07
except earnings-per-share) Earnings Earnings
After- After-
Pre-tax tax EPS Pre-tax tax EPS
As reported $1,636 $1,322 $0.85 $1,253 $989 $0.63
Adjusted for specified
items:
(Gain) on conclusion of
TAP joint venture ($95) ($95) ($0.06) - - -
(Lower) income tax from
audit settlement - ($30) ($0.02) - - -
(Gain) on sale of MLNM stock ($52) ($40) ($0.03) - - -
Cost reduction initiatives $58 $45 $0.03 $54 $43 $0.03
Acquired in-process R&D $79 $61 $0.04 - - -
Suspended depreciation and
amortization - - - ($45) ($35) ($0.02)
Omnicef inventory write-down - - - $51 $41 $0.03
Fair value adjustments for
BSX stock and realized
(gains) on disposition - - - ($86) ($55) ($0.04)
Acquisition integration,
TAP separation and other $57 $45 $0.03 $117 $93 $0.06
Net specified items
(gain) / loss $47 ($14) ($0.01) $91 $87 $0.06
As adjusted $1,683 $1,308 $0.84 $1,344 $1,076 $0.69
In the quarter, there were three events that positively impacted
reported earnings per share that have been excluded from earnings as
adjusted. This includes a gain related to the conclusion of the TAP
joint venture, which closed in the quarter, the impact of a
favorable settlement of prior years' IRS tax audit, and a gain on
the sale of an equity investment in Millennium Pharmaceuticals.
Partially offsetting these favorable items were cost reduction
initiatives related primarily to continued efforts to generate
efficiencies in our global manufacturing operations. These include
actions announced last year to streamline operations in our vascular
business and a number of smaller actions across the businesses.
Acquired in-process R&D relates to technology investments that took
place in the quarter. Acquisition integration, TAP separation and
other primarily reflects integration costs from previous
acquisitions, costs associated with the recent conclusion of the TAP
joint venture, and a write-down of an intangible asset.
The settlement of the tax audit has been reflected as a reduction in
the Taxes on earnings line item in the Consolidated Statement of
Earnings (see Q&A answer 8). The pre-tax impact of the remaining
specified items by Consolidated Statement of Earnings line item is
as follows (dollars in millions):
2Q08
Cost of Other
Products Acquired (Income)/
Sold IPR&D R&D SG&A Expense
As reported $3,120 $79 $657 $2,052 ($310)
Adjusted for specified items:
(Gain) on conclusion of TAP joint
venture - - - - ($95)
(Gain) on sale of an equity investment - - - - ($52)
Cost reduction initiatives $40 - $13 $5 -
Acquired in-process R&D - $79 - - -
Acquisition integration, TAP
separation and other $37 - $1 $19 -
As adjusted $3,043 - $643 $2,028 ($163)
Q4) How does the second-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):
2Q08 2Q07
Cost of Gross Cost of Gross
Products Gross Margin Products Gross Margin
Sold Margin % Sold Margin %
As reported $3,120 $4,194 57.3% $2,804 $3,566 56.0%
Adjusted for specified
items:
Cost reduction initiatives ($40) $40 0.6% ($54) $54 0.9%
Omnicef inventory write-down - - - ($51) $51 0.8%
Suspended depreciation and
amortization expense - - - $51 ($51) (0.8%)
Acquisition integration, TAP
separation and other ($37) $37 0.5% ($72) $72 1.1%
As adjusted $3,043 $4,271 58.4% $2,678 $3,692 58.0%
The second-quarter 2008 adjusted gross margin ratio was 58.4
percent, up 40 basis points from the prior year and up 160 basis
points sequentially from the first quarter. The gross margin ratio
this quarter reflects improved business and product mix. Abbott
continues to forecast a full-year gross margin ratio of
approximately 58 percent.
Q5) What are the eight major regulatory approvals Abbott received so far
in 2008?
A5) Abbott has received approval for eight new products or indications,
including:
* HUMIRA Psoriasis -- U.S. * HUMIRA JRA -- U.S.
* HUMIRA RA -- Japan * SIMCOR(R)
* XIENCE V * FreeStyle Freedom(R) Lite
* FreeStyle Navigator(R) * ARCHITECT(R) i1000SR(R)
Q6) What drove the strong SG&A and R&D spending in the quarter?
A6) The strong double-digit growth in SG&A included new and ongoing
promotional initiatives across multiple businesses, including
spending to support the eight new product approvals this year.
Growth in R&D expense reflected continued strong investment in our
broad-based pipeline, including early-to-mid-stage opportunities
across a number of therapeutic areas, such as oncology, immunology,
hepatitis C, neuroscience and our bioabsorbable stent program. See
Q&A answers 9 and 10 for a discussion of our pipeline opportunities.
Q7) What impacted Other Income?
A7) Reported Other income was $310 million during the quarter. This
included a $95 million tax-free gain from the conclusion of the TAP
joint venture, as previously forecasted, as well as a $52 million
pre-tax gain from the sale of an equity investment in Millennium
Pharmaceuticals, both of which were reflected as specified items,
as detailed in Q&A answer 3.
The remaining $163 million of other income is primarily related to
ongoing contractual payments from Takeda associated with the
conclusion of the TAP joint venture. These payments are based on
sales of marketed products and specified development, approval and
commercial events being achieved with respect to products retained
by Takeda. Payments were above our previous forecast of
approximately $100 million for the quarter. Our full-year forecast
for these payments remains approximately $300 million.
Q8) What was the tax rate in the quarter?
A8) The tax rate this quarter, excluding specified items, was 22.3
percent, slightly higher than our forecasted rate. The tax rate for
the first half of 2008, excluding specified items, was 21.0 percent,
in-line with our previous forecast and our outlook for the
full-year. The reported tax rate is reconciled to the ongoing rate
below:
2Q08
Pre-tax Income Tax
Income Tax Rate
As reported $1,636 $314 19.2%
Specified items $47 $31 65.1%
Lower income tax from audit settlement - $30 -
Excluding specified items $1,683 $375 22.3%
Q9) What are some near-term opportunities in Abbott's broad-based
pipeline?
A9) Abbott's late-stage pipeline has generated eight new regulatory
approvals to date in 2008. Highlights of the near-term opportunities
include:
* HUMIRA
o Psoriasis -- Launched in Europe and the U.S. in the
first-quarter 2008.
o Juvenile RA -- Launched in the U.S. in the first quarter
of 2008.
o RA Japan -- Launched in June 2008.
o Psoriasis Japan -- Indication filed, under regulatory
review.
o Ulcerative colitis -- Currently in Phase III development.
o Pediatric Crohn's disease -- Currently in Phase III
development.
* Controlled Release Vicodin -- Presented Phase III results for
our controlled-release form of Vicodin at the American Pain
Society meeting in May, demonstrating Vicodin CR significantly
lowered chronic lower back pain intensity with 12-hour dosing,
meeting the study's primary and secondary endpoints. We expect
fourth-quarter approval of Vicodin CR.
* TriLipix (formerly known as ABT-335) -- Presented pivotal Phase
III data demonstrating safety and efficacy of Abbott's
next-generation fenofibrate, TriLipix, in combination with
CRESTOR (rosuvastatin). To support TriLipix, Abbott has
executed the largest clinical program to date to evaluate the
efficacy and safety of a fibrate in combination with statins.
We expect a fourth-quarter approval of TriLipix. Development
also continues on a fixed-dose combination of TriLipix and
CRESTOR to address all three lipid parameters in a single pill.
We plan to submit a New Drug Application for this fixed-dose
combination in the second half of 2009.
* Flutiform -- The clinical program for Flutiform, a combination
asthma treatment in Phase III development, is targeted for a
first-quarter 2009 NDA filing.
* 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. Abbott moved ABT-874 into
Phase III development for psoriasis in December 2007.
* Diabetes Care Pipeline -- The FreeStyle Freedom Lite
no-calibration meter was launched internationally last year and
was launched in the United States in the first quarter of 2008.
Abbott's FreeStyle Navigator Continuous Glucose Monitoring
System was launched in Europe last year and was approved and
launched in the United States in the first quarter of 2008.
Also in development is a fully-integrated blood glucose
monitoring system combining a meter, test strips and lancing
capabilities in one device.
* Core Laboratory Diagnostics -- In April, Abbott introduced the
ARCHITECT i1000SR immunochemistry analyzer in the United
States, expanding its ARCHITECT family of diagnostic instrument
systems for clinical laboratories. In 2009, we plan to
introduce the ARCHITECT c4000(TM), a clinical chemistry
analyzer designed for small-to-medium-sized labs. The c4000 is
compatible with the i1000, which will allow seamless
integration of clinical chemistry and immunoassay testing on
one platform.
Q10) What are some early and mid-stage opportunities in Abbott's
broad-based pipeline?
A10) Abbott is advancing leading-edge scientific discoveries in its
pipeline, including the following selected highlights from its
early-to-mid-stage development pipeline:
* Oncology
o Abbott's Oncology pipeline includes targeted therapies
that represent promising, unique scientific approaches to
treating cancer. Our collaboration with Genentech to
develop two Abbott-discovered compounds including a
multi-targeted kinase inhibitor and Bcl-2 family protein
antagonist, continues to progress. At the American Society
of Clinical Oncology Meeting (ASCO) meeting in May, Abbott
highlighted clinical trial data on both of these
compounds.
o Oncology compounds in Abbott's pipeline that are not part
of the collaboration include: a PARP-inhibitor, which
prevents DNA repair in cancer cells, enhancing the
effectiveness of current cancer therapies; an oral
anti-mitotic in Phase II for non-small cell lung cancer
and neuroblastoma; and a biologic anti-tumor agent with a
novel mechanism of action.
* Neuroscience
o Abbott is conducting innovative research in neuroscience,
where we've developed compounds that target receptors in
the brain that help regulate pain, mood, memory and other
neurological functions to address conditions such as
attention deficit hyperactivity disorder, Alzheimer's
disease and schizophrenia. We have a number of novel
early-and-mid-stage compounds that have the potential to
address critical, unmet needs for patients with these
conditions.
o Abbott is also working to advance compounds that have the
potential to meet the market need for a non-opioid pain
therapy.
* Immunology
o Abbott's scientific experience with the anti-TNF biologic
HUMIRA serves as a strong foundation for our continuing
research in immunology. Products in development for the
treatment of immune-mediated diseases are designed to
selectively inhibit proteins that are responsible for
inflammation. In addition to our work with IL-12/23, we
are working to advance development of our early discovery
programs, including oral therapies for rheumatoid
arthritis, JAK kinase and P38, as well as other potential
biologic targets including IL-13 and IL-18.
o Additionally, our proprietary DVD-Ig technology represents
a promising approach that could lead to combination
biologic therapies.
* Hepatitis C
o Abbott's antiviral program is focused on the treatment of
hepatitis C, a disease that affects more than 170 million
people worldwide. Abbott has two active hepatitis C
programs including our partnership with Enanta
Pharmaceuticals to develop protease inhibitors as well as
an internal polymerase program.
* Bioabsorbable Drug-Eluting Stent
o In March at the American College of Cardiology, Abbott
presented encouraging data from the world's first clinical
trial for a fully-bioabsorbable drug-eluting stent (DES)
to treat coronary artery disease. The bioabsorbable DES is
designed to be slowly metabolized by the body and
completely absorbed over time.
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