NEW YORK – Amid the fluctuations of the volatile COVID-19 pandemic, Abbott issued guidance for full-year 2022 while also saying that the estimates may be more of a guess, albeit an educated one, than in normal years.
On a conference call to discuss the firm's fourth quarter and full-year 2021 financial results Abbott said that it expects full-year 2022 earnings per share of at least $3.43 and adjusted EPS of at least $4.70, as well as COVID-19 testing-related sales of $2.5 billion. At the same time, though, Abbott CEO Robert Ford cautioned that forecasting testing demand for more than a couple of months at a time is "challenging" though the firm expects that the majority of the projected COVID-19 testing revenues will come early in the year.
Ford noted that in the firm's diagnostics business, COVID-19 testing was "a big part of the story" but not all of it, as global COVID-19 testing-related sales in the fourth quarter were $2.3 billion, with $2.1 billion from rapid tests. Total diagnostic revenues were up 3 percent year over year in Q4 to $4.47 billion from $4.35 billion.
While Ford said that there's uncertainty at the beginning of every year when it comes to guidance, this year there's "a little bit more than usual" due to the changes in the COVID-19 pandemic, such as the recent surge related to the Omicron variant and the unknowns of potential new waves of infections.
The macroeconomic effects of the pandemic have also presented problems in preparing for the future due to staffing shortages in hospitals and laboratories, supply chain issues, and inflation, he said. Robert Funck, Abbott's CFO, said on the call that inflation and supply chain challenges are linked together and that the company has seen some impacts from them, particularly in transportation costs, manufacturing inputs, and commodities, but noted that the problems "are certainly not unique to us or our industry."
The key question for Abbott is "how is [COVID-19 testing] going to play out throughout the rest of the year given the magnitude of what the testing could look like, between it completely going away or it staying or increasing at this level?" Ford said. "Factoring all those elements over here, I think this was the right starting point" for the full-year guidance.
Abbott's initial financial guidance for this year takes into account those uncertainties while also considering the strong underlying base business and the "acceleration in a lot of our portfolio versus where we were pre-pandemic," as well as the fact that Abbott has fully funded investments to support its upcoming product launches, Ford said.
As part of its initial forecast, Ford said that the company doesn't expect COVID-19 to completely go away starting in the second quarter, despite the firm's guidance that the majority of its COVID-19 testing revenues will come early in the year. Abbott has "built a lot of capacity … especially in rapid testing" and is prepared for what may come, he added.
There is also potential for COVID-19 testing to go beyond what the company has predicted if other variants emerge or another surge hits, he said and added that he thinks that "COVID-19 testing is going to be still around" and that the Omicron variant "has catalyzed a pretty significant shift in global rapid testing and screening."
Ford noted that core testing volumes, excluding COVID-19 testing, were continuing to grow during the fourth quarter until December, when the Omicron variant hit, but that Abbott expects the core testing business to recover going into Q2 2022. He added that once the first quarter of 2022 is over, the company will have a better sense of what the COVID-19 demand will be not only in the US but internationally.
Ford also said that the company is reinvesting its COVID-19-related revenues back into the business and noted that mergers and acquisitions could be in the cards for Abbott. "If there's anything out there that looks strategic for us and that makes financial sense, we've got plenty of capacity," he said. "We've generated a lot of strong cash flow and quite frankly there's been a meaningful step up in that cash flow over the last year and a half" due to the pandemic.
"We are now in a great position as a result of all the efforts that we've had on cash flow conversion and now with COVID-19 cash," he said.
He added that medical devices and diagnostics are the two key areas where Abbott could potentially make a deal, with tuck-in and medium-sized deals being more likely.
"I think we're in a really good position strategically [and financially], and I'm excited about all of the growth opportunities ahead of us," Ford said.