Abbott’s Nutritionals Segment, New Drugs Lift Outlook

by Trefis Team
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Abbott Labs
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Abbott Labs (NYSE:ABT) reported strong Q1 results on the back of growth in its nutritionals segment and key drugs including Humira, AndroGel, and Lupron. [1] The company also raised its earnings per share (EPS) guidance for 2012 to $5.00 to $5.10 from $4.95 to $5.05. Competitors Pfizer (NYSE:PFE) and Merck (NYSE:MRK) are set to release their Q1 earnings in the next two weeks.

See our complete analysis for Abbott Labs

Sales Growth: Nutritionals, Humira, AndroGel

ABT registered 10% growth in nutritionals sales in the first quarter compared to Q1 2012, largely due to market share gains for infant formula Similac and pediatric nutritional products like PediaSure, Ensure and Glucerna. In the pharmaceuticals segment, sales increased 8.3% as a result of strong performance by key drugs including Humira, AndroGel, Creon, Lupron and Synthroid. Humira sales grew 17.4% to $1.9 million and contributed nearly 20% to overall sales.

Trends in Q1: Margin Improvement; Strong R&D

The company saw improved margins in the quarter largely as a result of improved efficiencies across several operating divisions. The company’s focus on developing new products was evidenced by the fact that its overall R&D expense was nearly 10% of total sales in Q1. Also, Abbott received approval for Xience Prime in Japan during the quarter, which will drive revenue growth for its vascular products segment.

Focused on Pipeline, Pharma Business Split

Abbott has been very proactive with respect to its growth strategy, focusing primarily on pipeline development. In the past, the company invested heavily in product development through in-house R&D or partnerships like its agreement with Galapagos to develop an oral JAK1 inhibitor. Additionally, in order to avoid the sudden impact of generic competition following patent expiries, Abbott has been trying to reduce its dependence on individual products. As a result, it committed to several purchases in the past like Solvay and Piramal to diversify its portfolio of offerings and expand into emerging markets. Lastly, the company plans to split into two public companies to differentiate the established drug business from the research-based pharmaceuticals.

We are in the process of revising our $66 Trefis price estimate for Abbott to incorporate the Q1 results.

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Notes:
  1. Abbott Reports Double-Digit Ongoing Earnings-Per-Share Growth in First Quarter; Raises Full-Year 2012 Outlook, Company Press Release, April 2012 []
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