Investopedia: Abbott's Next Act

Abbott (NYSE:ABT) showed its mettle during the Great Recession and was one of the relatively few larger healthcare companies to post solid ongoing results. Unfortunately, Wall Street gives little time for basking in past successes before turning to the question of how high levels of performance can be continued or exceeded. On that score, Abbott would seem to have some work to do. 

A Solid End to the Year 

Abbott's fourth-quarter results came in basically as expected. Revenue rose more than 13%, as pharmaceutical sales jumped almost 23% and vascular sales rose nearly 14%. Diagnostics was less impressive yet still positive (up 4%), while nutrition was flat. Looking at three key businesses, Humira sales were up 13% (to nearly $1.9 billion), Tricor/Trilipix sales were up more than 19% (to almost $500 million) and stent sales were up almost 20% to over $500 million. (For more, see 6 Important Earnings Announcements.)

Abbott's profitability was a bit more mixed, particularly given the need for some adjustments to the numbers. Gross margin did jump more than two full points from last year, but operating margin shrank a bit as the company ramped up its R&D spending.

Looking for the New "New Thing" 

Although Abbott is often praised as a top-notch healthcare enterprise, the reality is that the company depends upon Humira for a large chunk of its profits. That's a problem, as Pfizer (NYSE:PFE) and Rigel (Nasdaq:RIGL)/AstraZeneca (NYSE:AZN) have promising alternatives in the clinic that have seemed to produce solid efficacy with a more convenient oral administration. While the current FDA aversion to the new may shield Humira to some extent, eventually competition (or generics) will hit the market and erode this profit center.

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