Abbott Laboratory's shares down 15%, looks to end slump

Abbott Laboratories' investors, coming down from a Humira high, are clamoring for their next growth fix.

Concerns over decelerating growth for the blockbuster anti-inflammatory drug have driven the North Chicago-based drug- and medical-device maker's shares down 15% so far this year, the second-worst performance among 13 companies in the Standard & Poor's 500 Pharmaceutical Index, which is up 2% for the same period.

"We remain concerned about the deceleration in Abbott's growth going forward due to the challenge facing the company's key growth drivers," New York-based Wells Fargo & Co. analyst Larry Biegelsen said in a July research note.

Tepid first-quarter growth of 17% for Humira, which treats rheumatoid arthritis, Crohn's disease and other maladies, hammered Abbott shares. A rebound of 21% sales growth in the second quarter didn't draw investors back. The uptick "failed to satisfy concerns on Abbott's changing growth profile," New York-based Citigroup Inc. analyst Matthew Dodds said in a July note.

Humira sales should grow an average 12.7% annually through 2012, when they ought to hit $7.8 billion and account for more than 20% of Abbott's projected total revenue of $37.58 billion, New York-based Morgan Stanley & Co. analyst David Lewis forecasts. Growth has slowed from a 48% surge in 2008, as some budget-conscious patients forgo the expensive treatment and new competitors hit the market. But Humira still is growing faster than the products Abbott CEO Miles White has added through acquisitions in hopes of picking up the slack: cholesterol drugs and heart stents, tiny coils that prop open clogged arteries.

Cholesterol drug sales should increase 8.3% annually through 2012, to $2.93 billion, Morgan Stanley's Mr. Lewis predicts. Sales have been sluggish lately amid an industrywide slump. And many analysts expect a generic rival to Abbott's top-selling cholesterol medication, Tricor, sometime next year.

Unless Abbott can quickly switch patients to a new version — the recently released Trilipix — the generic incursion could drag Abbott's overall cholesterol sales down by 15% in the second half of 2010, Citigroup's Mr. Dodds warns.

The heart-stent business won't provide a lift for long either, analysts say. Abbott's drug-coated stent, Xience, quickly became the industry's top seller after its 2008 launch, but the overall heart-stent market is flat.

John Thomas, Abbott's vice-president of investor relations, told analysts in July that Humira "continues to represent a steady growth driver for Abbott in the coming years." He said, "We are very pleased with . . . the progress we have made regarding new product flow."

Still, the dearth of new hits could prod Mr. White, who snagged Humira through a 2001 acquisition, to scour for more deals.

"We think Abbott needs to make an acquisition to enhance its late-stage pharmaceutical pipeline and reduce its dependence upon Humira," Wells Fargo's Mr. Biegelsen says.