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Abbott Q3 Diagnostics Revenues Fall 33 Percent on Lower COVID-19 Testing

NEW YORK – Abbott's third quarter Diagnostics revenues declined 33 percent on a reported basis year over year due to an expected decrease in COVID-19 testing, the company said on Wednesday.

However, excluding the impact of COVID-19 testing, the company's Diagnostics sales rose 9 percent on a reported basis and 10 percent on an organic basis.

For the three months ended Sept. 30, the Abbott Park, Illinois-based firm reported overall revenues of $10.14 billion, down nearly 3 percent on a reported basis from $10.41 billion a year ago but beating the consensus Wall Street estimate of $9.81 billion. The firm said that its organic sales, excluding the impacts of foreign exchange, exiting its pediatric business in China, and the acquisition of Cardiovascular Systems, fell nearly 2 percent year over year.

Excluding COVID-19 testing-related sales, total worldwide Q3 sales rose 14 percent on an organic basis, Abbott said.

Abbott's Q3 Diagnostics revenues fell to $2.45 billion from $3.64 billion in the prior-year quarter. Within Diagnostics, Core Laboratory Q3 revenues rose 8 percent on a reported basis to $1.31 billion from $1.22 billion; Molecular revenues fell 28 percent to $133 million from $183 million; Point-of-Care revenues rose 10 percent year over year to $140 million from $127 million; and Rapid Diagnostics revenues fell 59 percent to $862 million from $2.11 billion. Excluding COVID-19 testing sales, Core Laboratory revenues climbed 10 percent, Molecular revenues declined nearly 4 percent, Point-of-Care revenues rose 10 percent, and Rapid Diagnostics revenues increased 13 percent. 

On a conference call to discuss the firm's financial results, Abbott CEO Robert Ford said that the Core Laboratory business had above-market performance in both the US and internationally and saw a continued increase in demand for routine diagnostic testing. The company also saw a "strong recovery" in its blood transfusion business after a period of lower plasma donations during the COVID-19 pandemic.

The Rapid Diagnostics base business benefitted from increased demand for respiratory tests in anticipation of an earlier than usual start to the influenza season in the Northern hemisphere, Ford said.

The firm's global COVID-19 testing-related sales fell to $305 million in the quarter from $1.67 billion reported a year ago.

Ford also discussed the impact of China on Abbott's business, as the country prepares to implement a value-based procurement program for diagnostics. That process is expected to start sometime in the first half of 2024, Ford said, and will involve about 20 percent of Abbott's core laboratory business. The program will apply to certain disease areas like infectious disease and fertility testing and could provide upside, Ford said, as it presents an opportunity to gain volume in segments where Abbott has a lower market share. He also noted that the company already has experience with VBPs in other areas of its business, so it is prepared for the process.

In its other businesses, Nutrition revenues rose nearly 16 percent on a reported basis and 18 percent on an organic basis to $2.07 billion from $1.80 billion; Established Pharmaceuticals rose 3 percent on a reported basis and 11 percent on an organic basis to $1.37 billion from $1.33 billion; and Medical Devices rose 17 percent on a reported basis and 15 percent on an organic basis to $4.25 billion from $3.62 billion.

Ford said that his confidence in the business is "very high" despite potential macroeconomic challenges heading into 2024, saying that the firm's portfolio has "been built to withstand this type of environment." There's "clearly momentum that's building here … and I believe that momentum is going to sustain and continue as we go into 2024."

He also mentioned the company's M&A strategy, as it has completed multiple large acquisitions in 2023. The firm acquired medical device company Cardiovascular Systems in February for about $890 million and insulin management company Bigfoot Biomedical for an undisclosed amount last month. Ford said that company valuations going down across the biotechnology industry is a good opportunity and that Abbott is in a "great strategic position" to execute on its M&A strategy. "We've got plenty of capacity to engage, and if there's the right opportunity that comes along in this period, we'll be ready."

Abbott reported Q3 net earnings of $1.44 billion, or $.82 per share, compared to $1.44 billion, or $.81 per share, in the year-ago period. Adjusted EPS for the recently completed quarter was $1.14, beating analysts' consensus estimate of $1.10.

The firm narrowed its earnings guidance range, saying it expects full-year 2023 diluted EPS between $3.14 and $3.18 and adjusted EPS between $4.42 and $4.46. It previously forecasted diluted EPS between $3.02 and $3.22 and adjusted EPS between $4.30 and $4.50. The company also projects full-year organic sales growth – excluding COVID-19 testing related sales – in the low double digit percent range.

Abbott CFO Phil Boudreau said on the conference call that for the fourth quarter of 2023 the firm expects EPS between $1.17 and $1.21 with underlying base business organic growth excluding COVID-19 testing in the low double digits.

In Wednesday afternoon trading on the New York Stock Exchange, shares of Abbott were up nearly 4 percent to $95.57.