This article has been updated to include additional comments from Abbott's earnings call.
NEW YORK (GenomeWeb) – Abbott today said that its Diagnostics business grew sales 4 percent year over year in the second quarter, driven in part by strong growth in for its core laboratory and point-of-care tests.
For the three months ended June 30, Abbott reported overall Q2 revenues of $6.64 billion, up 24 percent on a reported basis and 3 percent on a comparable operational basis from $5.33 billion in Q2 2016. The company narrowly beat the consensus Wall Street estimate of $6.63 billion.
Abbott reported Diagnostics sales of $1.27 billion compared to $1.23 billion in the prior-year quarter. Within Diagnostics, core laboratory Q2 sales grew 4 percent to $1.02 billion; molecular revenues dropped 5 percent to $114 million; and point of care grew 9 percent to $139 million.
In June, Abbott received CE marking for its Alinity hq hematology system, which identifies and quantifies different types of blood cells to help diagnose blood-related diseases. It is the fifth new diagnostic system the company has launched in Europe since November 2016, the firm said.
The firm noted that within the core lab segment in the US, it captured share in the blood screening market that drove almost 13 percent sales growth. Abbott also noted that in molecular diagnostics, it saw "continued growth" in infectious disease testing, offset by a planned scale-down in other areas. Point-of-care diagnostics sales growth in the quarter was led by "continued adoption" of the i-STAT handheld blood testing system "in the US and strong growth internationally," the firm reported.
On a conference call to review Q2 financial results, Abbott CEO Miles White said that growth in diagnostics "was led by strong performance in core laboratory and point-of-care diagnostics. This business, which is already a global leader and growing faster than its market, is in the early innings of significantly enhancing its competitive position with the launch of Alinity, a highly differentiated and innovative suite of new systems across all areas [in which] we compete."
White noted that the firm is seeing "really good order activity" and "really good uptake" of its CE-marked Alinity systems in Europe, and that the firm is on track with numbers of closed accounts and instrument placements. However, many of the early installations involved "heavy cannibalization" of existing systems and volume, he added.
"It's not an instantaneous 'kaboom,'" White said. "It's more of a rolling launch where you will see a rolling impact that picks up more and more momentum over the next couple of years."
White also said that he expects Abbott's acquisition of Alere will close "by the end of Q3" this year, and noted that he is "anxious" to complete the acquisition and "confident" that it will close.
Abbott has said that it will pay $51 per share to acquire Alere for a total price of about $5.3 billion — reduced from an original purchase price of around $5.8 billion proposed in February 2016 when Abbott announced that it was acquiring Alere.
After the deal was originally announced, Alere suffered a series of setbacks that prompted Abbott to seek termination of the acquisition. In April, however, Abbott and Alere agreed to amend the terms of their acquisition agreement and dismiss lawsuits they had filed against each other.
White added that the firm had said about a year ago that it expected the deal would be accretive to earnings by $.11 to $.13 per share in the first year. He said that he would not change that assumption, but the company would be able to provide a more precise estimate when Alere is in its hands. No accretion is expected in 2017, he noted.
However, he also said that when Abbott estimated the impact of the acquisition on earnings per share, it was not aware of divestitures that would be needed to satisfy antitrust approvals, or of Alere's loss of Medicare reimbursement for its Arriva business in October 2016.
In a deal announced earlier this week, Alere is selling its Triage B-type naturietic peptide assay business and its Triage MeterPro cardiovascular and toxicology assets to Quidel for $400 million and $40 million in contingent consideration. The firm is divesting the products in order to obtain antitrust approvals required for the pending acquisition of the company by Abbott.
Earlier, in mid-October, Alere had received a letter from CMS stating that Arriva's Medicare supplier billing number was being revoked and that it would be barred from re-enrolling in the Medicare program for a period of three years because it had billed for items and services for deceased Medicare beneficiaries.
White noted that Abbott is "looking into how [it] can restore" Arriva's standing with Medicare. Additionally, he said that a divestiture, modest in size but separate from the sale to Quidel, had occurred but had not yet been made public.
In its other businesses, Nutrition sales fell less than 1 percent to $1.73 billion; Established Pharmaceuticals grew 4 percent to $1.02 billion; and Medical Devices soared by 89 percent to $2.60 billion. Abbott noted that total Abbott and Medical Devices revenues includes prior year results for St. Jude Medical, which was acquired on Jan. 4, 2017, and excludes prior year and current year results for the Abbott Medical Optics and St. Jude Medical vascular closure businesses, which were divested during the first quarter of 2017.
Abbott reported net earnings of $283 million, or $.16 per share, in Q2 compared to $615 million, or $.41 per share, in the year-ago period. Excluding special items, EPS was $.62, exceeding the company's previous guidance range and besting analysts' consensus estimate of $.61. The firm said that its net earnings excluding specified items ruled out net after-tax charges of $826 million, or $0.47 per share, for intangible amortization expense and other expenses "primarily associated with acquisitions and restructuring actions."
The firm spent $513 million on R&D in Q2, up 47 percent from $348 million in Q2 2016, and logged $2.13 billion in SG&A expenses, up 22 percent from $1.74 billion in the prior-year quarter.
Abbott raised its full-year 2017 EPS guidance range from continuing operations to $1.03 to $1.13 per share. The firm said that it estimates 2017 adjusted EPS from continuing operations in the range of $2.43 to $2.53.
Company officials said on the call that they expect diagnostics sales growth in the mid- to high-single digits in Q3.
In afternoon trading on the New York Stock Exchange, shares of Abbott were up 3 percent at $50.91.