Abbott Laboratories is aiming to show it's back on track after a turbulent year working toward two major acquisitions. The Abbott Park, Ill.-based company closed its $25 billion purchase of St. Jude Medical Inc. at the start of last quarter, which doubled its medical device sales for the period. It also agreed last week to an amended deal with diagnostics acquisition target Alere, reducing the deal value to $5.3 billion from $5.8 billion; it's slated to close next quarter.
With the logistics of the St. Jude and Alere deals largely behind it, Abbott is focused on integration execution. First up is swiftly and completely satisfying the FDA on a recent warning letter regarding a former St. Jude manufacturing facility in Sylmar, Calif. That's expected to hinder some pending FDA approvals, offering further pressure for a rapid resolution.
ADDRESSING THE FDA WARNING
"We've been aware of the circumstances here for some time, and we've been working with our St. Jude colleagues for some time – even before close – on GMP matters at the site. So, we got a pretty good head start here on the issues and a fair amount of dialogue with the FDA about the issues. So, having said that and being clearly disappointed in the outcome, I'd say the impact will depend a lot on our response – how thorough, how effective that response is," said Abbott chairman and CEO Miles White on the first quarter earnings call.
He said he couldn't predict a time frame for resolution of the warning letter issues, but said that Abbott had good visibility on the issues and started working to address them last year. White also declined to comment decisively on how the facility warning letter would affect in-process FDA approvals for devices that would be manufactured at the Sylmar facility.
"With regard to the timing of approvals, the new products that we have under review with the FDA remain under review. We know that they're continuing to review those submissions. So that's a good thing, and so I don't think we can draw any conclusions from that, that are negative or positive. I think that it's going to depend on the quality of our response here," summed up White.
The company didn't revise any projected launch dates related to the FDA warning letter, but may do so later this year. Abbott has had a chance to inspect all of St. Jude's facilities and doesn't see indications of problems elsewhere, White said.
DX AND DIABETES STRATEGY
White was notably upbeat on Alere, after nailing down a $500 million discount on the long-beleaguered deal.
"Point-of-care testing remains an attractive growth segment within the in vitro diagnostics market, and the acquisition of Alere will significantly expand our diagnostics presence and leadership in that space," he said. But he did note that Abbott will divest "a couple of pieces" of Alere.
Abbott's existing diagnostics business grew at a 4.7 percent clip during the first quarter to almost $1.2 billion. The company recently launched four new diagnostic systems with an additional two systems forthcoming.
"Diagnostics is in the process of launching the biggest range of new systems and new products that's ever been done in the entire space in history," White said.
Last quarter, Abbott sold its Medical Optics business to Johnson & Johnson, as well as part of the St. Jude vascular closure business to Terumo Corp. in a pair of deals each for more than $1 billion.
Diabetes care was one of Abbott's top performing device categories, growing 22.9 percent last quarter as compared to the same period a year earlier to $292 million. The 30-country availability, including in Europe, of its continuous glucose monitor that doesn't require fingerstick calibration Freestyle Libre is driving this growth.
Abbott continued to refuse any specifics on the timing of and FDA submission or U.S. launch for the Freestyle Libre. It's already in use by about 300,000 patients, which White noted stacks up favorably to its competitors. He also said the device enjoys reimbursement across European countries, which he called "unprecedented." There is still some self-pay in Europe, White added, but said that reimbursement is expanding.
"We've got both great patient acceptance, great value proposition. And then as we said, payers, governments are all giving a lot of support to the product because of not only what it does, but the value proposition it represents relative to what patients can do today. It makes a heck of a difference in the care and treatment of diabetic patients and their care for themselves," said White.
NEURO, CARDIO TOP PERFORMERS
Neuromodulation from St. Jude was another top growth performer with a 51.5 percent increase last quarter driven by several recently launched products for the treatment of chronic pain and movement disorders, specifically Burst devices for the treatment of chronic pain and deep brain stimulation for the treatment of movement disorders such as Parkinson's disease.
The larger businesses in structural heart and electrophysiology also had double-digit increases for the quarter. Structural heart gained 15.5 percent to reach $256 million, while EP was up 10.9 percent to $316 million.
"In electrophysiology, we initiated the U.S. launch of our Ensite Precision cardiac mapping system, which provides physicians with improved automation and 3-D images to better treat irregular heartbeats. Growth in structural heart was led by continued double-digit growth of Mitraclip, our market-leading device for the repair of mitral regurgitation," commented White. Ensite came from the St. Jude acquisition.
Medical devices are now the largest business within Abbott at almost $2.4 billion of the $6.3 billion in first quarter sales. That's almost exactly twice the device sales in the first quarter of 2016 due to the addition of St. Jude, with an operational increase of 4.5 percent.
"The addition of St. Jude here is powerful. I mean, arguably, we've got the best stent in the world, and it's challenging for everybody in this space to incrementally improve on the efficacy and quality of stents today. We have a lead position in the stent business, and now we've broadened that across six other major cardiovascular categories," boasted White.