UPDATE 3-Abbott cuts view due to health reform, shares fall

* Q1 EPS, ex-items, 84 cents vs 80 cents Street view

* Trims 2010 view, citing healthcare-reform costs

* Drugs, devices, nutritionals post double-digit gains

* Shares fall 2.2 percent, wider sector falls
(Adds analyst comment, reform impact on rival drugmakers)

By Ransdell Pierson

NEW YORK, April 21 (BestGrowthStock) – Abbott Laboratories Inc
(ABT.N: ) trimmed its 2010 profit forecast due to costs from U.S.
healthcare reform, overshadowing better-than-expected quarterly
earnings and sending a shiver through the drug sector.

Abbott joined U.S. rivals Eli Lilly & Co (LLY.N: ) and
Johnson & Johnson (JNJ.N: ), who earlier this week also reported
better-than-expected quarterly earnings, and cut their own 2010
forecasts due to the reform.

Abbott cut its 2010 profit forecast to between $4.13 and
$4.18 per share, from its earlier view of $4.20 to $4.25.

Under the new healthcare legislation, drugmakers are
required to provide larger rebates to patients in the Medicaid
insurance program, for those who demonstrate need. Gilead
Sciences (GILD.O: ), one of the world’s biggest and most
profitable biotechnology companies, on Tuesday also cut its
sales view due to health reform costs. [ID:nN20125409]

FAF Advisors analyst Tim Nelson said the costs now being
tallied from healthcare reforms were higher than investors had
expected, and raised concern over additional charges in the

“It’s the degree of impact from healthcare reforms that
people just weren’t expecting for these pharma names,” he said.

Shares in Abbott fell 2.2 percent and Gilead shed nearly 10
percent. The ARCA Pharmaceutical Index (.DRG: ) of large
drugmakers was down 1.21 percent, while the NYSARC Biotech
index (.BTK: ) fell 1.7 percent.

Sanford Bernstein analyst Derrick Sung described Abbott’s
overall earnings report as solid. He estimated reforms would
crimp Abbott sales by $230 million this year, or about 11 cents
per share, although Abbott hopes to offset 4 cents of the hit
with a strong performance from its underlying business.

Abbott (ABT.N: ) on Wednesday said it earned $1 billion, or
64 cents per share, in the first quarter, down from $1.44
billion, or 92 cents per share, in the year-earlier period when
Abbott reported a gain of over $500 million from winding down
its joint venture with Takeda Pharmaceutical Co Ltd (4502.T: ).

Excluding special items, including a 3 cents-per-share cost
for the healthcare reforms, Abbott earned 84 cents per share.
Analysts on average expected 80 cents per share, according to
Thomson Reuters I/B/E/S.


Abbott spokesman Scott Stoffel said the mid-point of the
lowered forecast would represent 12 percent growth this year,
and give Abbott its fourth consecutive year of double-digit
profit gains.

In the first quarter, all three of Abbott’s businesses —
drugs, devices and nutritionals — chalked up double-digit
sales gains, helped in overseas markets by the weaker dollar.

“It was a solid quarter and shows the resilience Abbott has
from the depth and breadth of its product lines,” Morningstar
analyst Damien Conover said, adding that the strong sales were
due, in part, to an improving economy.

Conover said that among large drugmakers and diversified
healthcare companies, Abbott is “best positioned” for
uninterrupted strong sales and profit growth, particularly
since it does not face major patent expirations.

Global company sales rose 14.6 percent to $7.70 billion, a
tad below Wall Street’s expectations of $7.73 billion. Revenue
growth would have been 4.1 percent lower if not for the weaker
dollar, which boosts the value of overseas sales.

Worldwide sales of Humira, the company’s biggest product,
jumped 37 percent to $1.4 billion. U.S. sales of the product
leaped 32 percent, a resurgence from 3 percent growth in the
fourth quarter.

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(Reporting by Ransdell Pierson, editing by Dave Zimmerman,
Maureen Bavdek and Gunna Dickson)

UPDATE 3-Abbott cuts view due to health reform, shares fall