Abbott Announce Strong Third Quarter Results & Split Off of Drug Division

Abbott Laboratories yesterday announced that they will split off their $18 billion drugs division into a new, as-yet unnamed company, as Abbott start to reverse their diversification of recent years.

The pharmaceutical unit will be named later in the year, while the remainder – diagnostics, devices, nutrition and branded generics – will keep the Abbott name, headed by current chairman and CEO, Miles White. Richard Gonzalez, who has been at the helm of the pharmaceutical division, will become chairman and CEO of the new firm.

Abbott’s stock price has languished in the recent past, gaining less than 1% in the last two years, as the huge success of its arthritis drug Humira – which pulls in around 45% of the firm’s overall revenues – muddied the waters and overshadowed their medical products.

Miles White commented that “there is no question that both our research-based pharmaceutical and diversified medical product businesses have evolved over time in very different ways into two different, compelling investment identities.”

Recently BMS (Bristol-Myers Squibb) split off non-pharmaceutical activities, including their baby formula business, to focus on drug research and development and Pfizer is expected to make a similar move later this year for its animal health and nutrition divisions, although the firm continues to insist that no decisions have been made on the fate of these non-core arms.

Worldwide sales increase by 13.2%

Meanwhile, Abbott unveiled third-quarter results with worldwide sales up 13.2% to $9.8 billion, including a favorable 5.3 percent effect of foreign exchange.

Proprietary Pharmaceuticals sales increased 13.5 percent in the quarter. Durable Growth Business sales increased 15.3 percent, including double-digit growth in Nutritionals, Established Pharmaceuticals, Core Laboratory Diagnostics and Diabetes Care. Innovation-Driven Device Business sales increased 6.0 percent, including double-digit growth in Molecular Diagnostics.

Emerging markets sales were $2.6 billion, up 21.0% year-on-year and representing 26.1% of total sales, with strong growth across all of Abbott’s operating divisions.

The gross margin ratio was 60.4 percent in the third quarter, above Abbott’s previous guidance, driven by favourable product mix.

Abbott is confirming its guidance for double-digit on-going earnings-per-share growth for 2011 and is narrowing its previous guidance range. Abbott’s on-going earnings-per-share guidance for full-year 2011 is $4.64 to $4.66, excluding specified items, reflecting 11.5% growth at the midpoint of the range.

White stated that a “strong performance across our businesses allowed Abbott to continue to deliver superior results.” “We also experienced strong growth in emerging markets and success in our broad-based pipeline, including several new product approvals, regulatory submissions and clinical trial initiations,” he added.


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