Abbott Labs to Cut 2,000 Jobs; Says 3rd-Quarter Net Rose 14%

Quicken ^ | 10/9/02

[Tumbleweed_Connection]

ABBOTT PARK, Ill. -- Abbott Laboratories (ABT, news) reported a 14% increase in third-quarter net income and said it will cut about 2,000 jobs and eliminate 10 facilities, in a move to restructure global manufacturing operations and reorganize its U.S. diagnostics business.

The pharmaceuticals giant said the restructuring plans will result in a fourth-quarter charge of $100 million to $125 million to write down manufacturing facilities and for employee severance costs. Abbott expects to see annual savings of $80 million to $100 million by 2005 once the plans are fully implemented.

The restructuring also includes the company's international operations. Abbott currently has about 70,000 employees world-wide.

For the third quarter, Abbott Labs (ABT, news) reported net income of $720.1 million, or 46 cents a share, compared with $631.4 million, or 40 cents a share, a year earlier.

The latest results included charges of two cents a share for impairments of certain equity investments. Excluding items in both quarters, the company earned $751.6 million, or 48 cents a share, compared with $686 million, or 44 cents a share, a year earlier.

The results were in line with the company's July estimate for earnings between 47 cents and 49 cents a share.

Last year, Abbott recorded charges of four cents a share related to the acquisition of BASF AG's Knoll drug unit and three cents a share for impairments of certain equity investments. Those charges were partially offset by a gain of three cents a share for settlement of a Department of Justice investigation.

Sales in the latest quarter rose 3.8% to $4.34 billion from $4.18 billion a year earlier.

While most of Abbott Labs' divisions posted sales increases, sales at the U.S. diagnostics business fell 9% to $288 million.

The diagnostic division is still operating under a restrictive consent decree with the Food and Drug Administration, which is hampering growth. Investors had originally hoped the problem would be resolved by now, but fear it might not be lifted until 2004.

Abbott Labs (ABT, news) said it will restructure the diagnostics unit around four product lines: immunochemistry, hematology, molecular and blood glucose monitoring.

In the third quarter, U.S. pharmaceuticals sales inched up 1.6% to $1.07 billion, hurt by sharp sales declines of several drugs. Sales for thyroid treatment Synthroid declined 18% to $170 million, and sales of the diet drug Meridia/Reductil plunged 52% to $16 million.

TAP Pharmaceutical's products sales rose 5.9% to $978 million, led by a 6.6% increase in heartburn medication Prevacid.

As part of the restructuring, Abbott plans to streamline its global manufacturing operations to improve efficiency and eliminate excess capacity. At the same time, Abbott Labs (ABT, news) said it will invest more than $450 million in capital over the next several years to expand current manufacturing facilities and build new operations to support future products.

"This restructuring will improve our global competitiveness and enhance our ability to invest in promising technologies to advance patient care," said Miles D. White, chairman and chief executive officer, in a statement.

Within its international operations, Abbott Labs (ABT, news) said it has identified additional synergies from the integration of Knoll, and is responding to " difficult economic conditions that are impacting business performance, particularly in Latin America."

Abbott Labs (ABT, news) said it expects to post earnings, excluding items of between 55 cents to 57 cents a share in the fourth quarter and between $2.06 to $2.08 a share for the full year. Abbott previous had forecast full-year earnings of $ 2.06 to $2.10 a share.

Separately, Abbott Labs (ABT, news) announced the initiation of a study to make its investigational medication, D2E7, available to rheumatoid arthritis patients in need of additional treatment options.

D2E7 is under review by the FDA and the European Agency for the Evaluation of Medicinal Products following simultaneous submissions earlier this year. Last month, Abbott began trials with the drug to treat Crohn's Disease and juvenile rheumatoid arthritis.

The product, which is inching toward FDA approval by mid-year 2003, could be a small blockbuster, reaching about $1 billion in sales.

[Tumbleweed_Connection]

STOP THE LEFTISTS

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[Doctor Stochastic]

A few more Democratic voters created.

[Willie Green]

Sounds like they're closing U.S. facilities and moving production to China.
I bet consumer health care costs aren't reduced 1¢ by this move.
Just creates more potential clients for Hillary Health Care,
nobody actually working to both produce and earn their medicine.

[virgil]

There probably are still Clintonistas in the FDA. The pharmaceutical companies lobbied heavily against Hillary's health care reform. I doubt the dems will be winning too many votes in this case.