Abbott Laboratories saw improvement with its medical devices and diagnostics in the third quarter, which featured wins in the areas of COVID-19, diabetes, and structural heart. The company revealed its quarterly results on a Oct. 21 call, during which management said it was increasing its guidance for full-year adjusted earnings per share (EPS) to at least $3.55.
Abbott CEO Robert Ford highlighted that sales in diagnostics grew nearly 40% in the quarter. Of note, the company launched Binaxnow, a disposable test about the size of the credit card that can determine if someone is infected with the virus that causes COVID-19 within 15 minutes without the use of an instrument.
“To date, we've sold more than 100 million COVID tests across our diagnostic platforms,” he added. “And we continue to pursue opportunities to further increase our manufacturing capacity to help meet the significant demand for testing around the world.”
In addition to the U.S. emergency use authorization for Binaxnow, the company also saw the U.S. launch of Freestyle Libre 2 and the CE mark for the Libre 3, Libre Sense Glucose Sport Biosensor and Mitraclip G4.
Overall, the company had worldwide sales of $8.9 billion, representing an increase of 9.6% on a reported basis and 10.6% on an organic basis, which excludes the impact of foreign exchange.
Medical devices rose 2.5% in the quarter, with five of its seven businesses achieving positive sales growth. Diabetes shined, growing 25%, with Freestyle Libre performing extremely well.
Robbie Marcus from JP Morgan asked about the company’s expectations for Libre growth globally. “We continue to focus on our strategy of kind of mass-market opportunity, mass-market potential and not see this as a niche play,” Ford replied. “We now have more than 2.5 million users. That's significantly more than our next competitor.”
With Libre 2, Ford noted that the product had been on the shelf as of mid-August, and customer response was very positive.
Ahead of the call, Cowen’s Josh Jennings expressed enthusiasm about the company, noting that the previous EPS was at least $3.25. “We continue to view ABT as unique among peers for its core business stability and COVID-19 testing tailwind,” he wrote.
In a note, Danielle Antalffy with SVB Leerink Research noted that third-quarter results beat estimates of both her group and the consensus. “This outperformance is somewhat as expected, given the well-telegraphed faster COVID recovery trend sustained throughout Q3 and the increasing expectations around COVID testing.”
Despite this, her group was surprised that the company faced pressure in terms of its shares and was underperforming the large-cap med-tech group. The Abbott Park, Ill.-based company (NYSE: ABT) closed at $105.93, down $2.43, or 2.24%.
BTIG’s Marie Thibault highlighted that the shares were off with a broader med-tech segment pullback. “We haven't identified one driver for this and believe it is temporary; potential reasons could include rotation out of top performers, hesitation ahead of a vaccine, or a desire for more concrete details on 2021,” she wrote. Her group maintained a neutral rating.
During the Q&A portion of the call, Joanne Wuensch from Citibank asked whether the company was leaning toward reinvesting some of the COVID-19 revenue vs. moving toward tuck-in M&A.
Ford acknowledged that COVID-19 testing had provided a boost this year, something that should continue in 2021. “We're in a unique position. We're not coming out of a hole. We're going to be delivering what I would say is very high, strong double-digit top and bottom line growth. And in doing that and in delivering those very high double-digit top and bottom line growth after double-digit earnings this year, we're still going to have plenty of opportunity to put investment into R&D and into sales and marketing to continue to drive not only the pipeline,” but also other opportunities.
Wells Fargo’s Larry Biegelsen asked about COVID-19 testing and potential declines when a safe, effective vaccine becomes available, particularly how the company will smooth out earnings and look at reinvestment.
“I don't think we're going to see that kind of decline in COVID testing,” Ford replied, adding that he foresaw steadiness even with a vaccine. He noted that the company plans to deliver differentiated, unique earnings growth and power, particularly as it has more than 100 new products in its pipeline.
“We can either accelerate their development and their coming to market. We've got opportunities to expand market development. The opportunities that we have in Mitraclip to be able to invest in that, strengthening of that market, strengthening our competitiveness.”