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Abbott Labs cuts 700 jobs in preparation for decrease in stent orders, posts higher 4Q profit
WASHINGTON (AP) ' Abbott Laboratories said Wednesday it will lay off 700 employees as part of ongoing restructuring efforts in its medical device and diagnostic businesses.
A company spokeswoman said most of the layoffs will be in the Chicago area and affect employees who manufacture the company's heart stents and diagnostic tests. Abbott expects a decline in orders for artery-opening stents later this year after the expiration of a supply agreement with medical device rival Boston Scientific Corp. Abbott currently sells a version of its Xience stent to Boston Scientific, which pays a 40 percent royalty on sales. Boston Scientific recently replaced that device with its own in-house stent, Promus Element.
About 500 of the eliminated positions are related to stents, with the remaining 200 from the company's diagnostic business. Abbott has been restructuring its manufacturing operations for several years, laying off about 1,900 employees in Lake County, Illinois this time last year.
News of the layoffs came several hours after Abbott reported a 12 percent increase in fourth-quarter profit Wednesday, as the blockbuster anti-inflammatory drug Humira continued to dominate the company's performance with double-digit sales growth.
In October, Abbott surprised investors and analysts with the announcement that it would spin off its branded drug business, including Humira. Company executives said the split would allow investors to separately value Abbott's businesses, which also include baby formula, generic drugs and medical implants.
Wednesday's results highlighted the rationale for the split, with top-selling drug Humira dominating the company's results, contributing $2.18 billion, or over 20 percent, of sales.
While Humira has been the key to Abbott's growth, it has also a weighed on the company's stock, overshadowing performance of its other businesses. The drug, which is used to treat psoriasis and rheumatoid arthritis, loses patent protection in 2016, and no obvious successor has appeared in the company's pipeline. The split-up frees Abbott from the risks and obligations of developing innovative pharmaceutical drugs, leaving the company with a more predictable business built around nutritional formula, generic drugs and heart stents.
Abbott earned $1.62 billion, or $1.02 per share, up from $1.44 billion, or 92 cents per share, in the prior-year period. Excluding one-time items, the company earned $1.45 per share, up from $1.30 in the same period a year earlier. Total company sales grew 4.1 percent to $10.38 billion.
Analysts polled by FactSet expect fourth-quarter earnings per share of $1.44 on revenue of $10.59 billion.
For 2012, the North Chicago, Ill., company expects to earn $4.95 to $5.05 per share, compared with the average analyst estimate of $5.02 per share.
The company's branded drug business posted sales of $4.78 billion for the period, an increase of 6.7 percent. The business, which includes the cholesterol drugs Trilipix and Niaspan among other treatments, is scheduled to become a separate business before the end of 2012. The new company will have revenue of roughly $18 billion.
Among Abbott's remaining businesses, generic drugs slipped 4.6 percent to $1.39 billion. Nutritionals rose 8.6 percent to $1.56 billion while sales of the company's stents and other heart devices were roughly flat at $826 million.
Company shares fell $1.19, or 2.1 percent, to $54.79 in afternoon trading.