Abbott Labs Swings to Loss After Booking Charge on Mylan Stake -- 2nd Update
October 19 2016 - 2:52PM
Dow Jones News
By Joseph Walker and Anne Steele
The EpiPen pricing controversy roiling Mylan NV has ensnared
another large health care company, albeit indirectly.
Abbott Laboratories, Mylan's largest shareholder, said on
Wednesday that it had written down the value of its investment in
the EpiPen maker by $947 million to reflect a sharp decline in
Mylan's share price through the end of the quarter on September
30.
Abbott said the accounting charge contributed to a $329 million
loss in the quarter, or 22 cents a share, compared with a
year-earlier profit of $580 million, or 38 cents a share, a year
earlier.
For now, the write-down is only a paper loss, and could be
reduced or even erased if Mylan's share price rebounds before any
Abbott sale of the stock. Mylan declined to comment.
Abbott currently owns a roughly 13% stake in Mylan, or nearly 70
million shares.
Abbott has been Mylan's biggest shareholder since selling part
of its overseas pharmaceuticals operations to Mylan last year in
exchange for 110 million Mylan shares that were valued at $5.77
billion when the transaction closed. Abbott sold more than a third
of the shares last year for $2.29 billion.
Abbott Chief Executive Miles White has faced frequent questions
from analysts about when he would sell the remaining shares. Mr.
White said last year that Abbott intends to sell the shares at some
point, but that he was not in a hurry to do so.
In an April 2015 conference call with analysts, Mr. White noted
that Mylan's share price had already risen significantly since
completing the acquisition with Abbott.
"I think it's been prudent to hold it," Mr. White said on the
2015 call. "It's proven to be a great value-gainer for us." The
topic didn't come up on Wednesday's conference call. An Abbott
spokesperson declined to comment on the company's plans for the
Mylan stock.
But through September 30, Mylan shares had fallen about 27% from
the time Abbott acquired the stock. Mylan's stock has fallen 17%
over the past three months alone amid popular outrage and political
scrutiny of the company's substantial price increases for the
EpiPen emergency allergy treatment.
In the third quarter, Abbott's sales rose 3% to $5.3 billion.
Mr. White cited strong performance in established pharmaceuticals
and medical devices sales, which rose 5.3% and 6.4%, respectively.
However, sales slipped 2% in Abbott's nutrition segment, the
company's largest.
Abbott's adjusted profit -- excluding certain items including
the Mylan write-down -- and revenue topped expectations. Abbott
narrowed and raised at the midpoint its 2016 adjusted earnings view
to $2.19 to $2.21 a share, from a previous range of $2.14 to
$2.24.
In April, Abbott agreed to buy St. Jude Medical Inc. for $25
billion amid consolidation in the health-care sector. Companies are
responding to cost pressures by beefing up, increasing their
negotiating leverage and pricing power. St. Jude and Abbott have
said they expect the merger to close in the fourth quarter.
St. Jude Medical on Wednesday said its third-quarter revenue
rose, led by a 13% sales increase abroad, though profit edged
lower.
Write to Joseph Walker at joseph.walker@wsj.com and Anne Steele
at Anne.Steele@wsj.com
(END) Dow Jones Newswires
October 19, 2016 14:37 ET (18:37 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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