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Abbott Labs Leads the Way for Big Pharma

By    |   Tuesday, 02 Aug 2011 12:21 PM

Some major drug companies, such as Merck (MRK) and Pfizer (PFE), have struggled to deal with bloated expenses and depleted pipelines of blockbuster drugs. But Abbott Laboratories is one big pharma train that keeps on chugging. Abbott has an array of patent-protected drugs, a top-line diagnostics division, a potent nutritional group, and a renowned vascular unit.

Abbott Labs’ all-star drug lineup now features autoimmune agent Humira, HIV/AIDS medicine Kaletra, and cholesterol drugs Tricor and Trilipix. They account for more than $8 billion, or 27 percent, of the company’s yearly revenue, according to Morningstar data.

Humira, a remedy for rheumatoid arthritis, remains the top dog, with its sales jumping 25 percent in the second quarter from a year earlier, to $2 billion. That surge came in the face of a strong challenge Johnson & Johnson's (JNJ) Remicade and Pfizer’s Enbrel.

Revenue from Trilipix and Tricor gained 6.2 percent to $419 million in the latest quarter, despite problematic trial results.

Abbott’s diagnostic and nutritional divisions, which account for more than 25 percent of the company’s revenue, will help cushion the effect of any patent runoffs on the drug list.

Robust earnings

Profit for Abbott exploded 50 percent, to $1.94 billion in the second quarter, though $519 million of the increase stemmed from a one-time tax benefit. Revenue climbed 9 percent to $9.62 billion. Humira’s strength and a 23 percent sales gain in emerging markets, to $2.59 billion, fueled the strong performance.

Analysts see sunny skies ahead for Abbott Labs. “We believe ABT's success with its targeted acquisition strategy will be a key driver for the robust growth we forecast for the company over coming years,” writes Standard & Poor’s analyst Herman Saftlas, who has a four-star buy rating on the stock.

ABT bought the pharmaceuticals unit of Belgium-based Solvay early last year. “We view this deal positively, as it gave ABT full rights to Tricor and Trilipix and provided for expansion
in vaccines and emerging markets,” he explains.

“We also expect the company's cost-savings initiatives, such as a planned 2 percent reduction in the sales force, to improve margins.” The company next reports Oct. 20.

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Some major drug companies, such as Merck (MRK) and Pfizer (PFE), have struggled to deal with bloated expenses and depleted pipelines of blockbuster drugs. But Abbott Laboratories is one big pharma train that keeps on chugging. Abbott has an array of patent-protected drugs,...
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2011-21-02
Tuesday, 02 Aug 2011 12:21 PM
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