Abbott CEO Miles White is optimistic that the company will overcome remaining hurdles to complete the purchase of Alere by the end of the third quarter, and that it will clear up manufacturing quality issues involving a plant acquired from St. Jude Medical.
Earlier this week, Abbott and Alere announced that they will move forward with a restructured merger agreement and end their protracted legal battle. Speaking to analysts to discuss first quarter results on Wednesday, White said that, even though Alere is "a bit of a fixer upper," it makes strategic sense to buy the company so that Abbott can expand its diagnostics business, especially in the burgeoning point-of-care space. It's not quite there yet, though.
"There’s some steps to get through here before we can close," said White, according to Seeking Alpha. "And we’ve got to finish the divestiture of a couple of businesses that will have to divest because of the regulatory approvals and I trust approvals. And I know what I would say is, we’re committed all of us to get all of that done in the next coming months here."
Abbott's other major acquisition this year, St. Jude Medical, is being integrated smoothly into Abbott, according to White. One concern, though, is a warning letter the company received last week following an FDA inspection of a facility in Sylmar, Calif., which manufactures St. Jude defibrillators and the Merlin home monitor.
White said the warning letter was not entirely unexpected.
"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," he said. "So, we’ve got a pretty good head start here on the issues and a fair amount of dialogue with the FDA about the issues."
Miles said FDA is aware of Abbott's strong reputation in GMP performance, and added that the company is following its standard practice of evaluating all other facilities when a quality issue arises.
"[If] I look at Alere and St. Jude, or even parts of Abbott that need, you know, improvements or whatever, I think we’ve got a very strong track record of improving performance in businesses that needs some improvements," added White.
Facility issues aside, St. Jude Medical - which added a strong portfolio in atrial fibrillation, heart failure, structural heart, and chronic pain to Abbott – lifted Abbott's bottom line for the first quarter ending March 31, 2017. Abbott reported better-than-expected first quarter sales of $6.3 billion, an increase of 29.7 percent over the prior year, and net earnings of $843 million, up from $615 million over the same period last year.
"Our first quarter results reflect a strong start to the year," said White in a press release. "The integration of St. Jude is going well and recently launched products are contributing to double-digit sales growth across several areas of our Medical Devices business."
On a reported basis, worldwide device sales rose 100.2 percent, led by the new Cardiovascular and Neuromodulation division, which grew 207.0 percent. Diabetes care sales, meanwhile, increased 20.2 percent on strong consumer uptake of Abbott's CGM device, the FreeStyle Libre.
Worldwide Diagnostics sales gained 3.6 percent on a reported basis in the first quarter, while sales for Point of Care Diagnostics – which Abbott expects to perform better as Alere joins the company – expanded 7.5 percent.
Established Pharma sales increased 7.0 percent, but Nutrition sales fell 1 percent, due mainly to challenges in the Chinese market.