While its medical device franchise is growing at a healthy rate overall, Abbott Laboratories is working quarter by quarter to unlock the growth potential of the devices it acquired from Minnesota’s St. Jude Medical two years ago.
“I remember in my discussions with [former St. Jude Medical CEO] Dan Starks when we were negotiating over the acquisition of St. Jude, Dan felt pretty strongly that the pipeline at St. Jude was underappreciated and that in their own internal models that the growth rate was out there in the high single digits,” Abbott Chief Executive Miles White told investors Wednesday. “The street didn’t agree with that at the time, because it didn’t see it yet, etc. But Dan was right.”
White estimated that St. Jude products have seen sales growth of at least 9%, including new-product launches and iterations of older devices. But it was difficult to discern that growth in quarterly earnings results posted Wednesday.
Abbott posted better-than-expected earnings and hiked its 2019 sales guidance, sending its shares up 3% for the day, to $85.76.
While medical devices made up Abbott’s largest and fastest-growing product group, with $3.1 billion in sales in the second quarter, up 7.5%, the biggest growth came from continuous glucose monitors for diabetes and the MitraClip device for mitral regurgitation — products that Abbott was making before it acquired St. Jude.
During the three months ending June 30, Abbott also saw strong sales growth of its marquee FreeStyle Libre continuous glucose monitor, a factory-calibrated blood monitor designed to be inexpensive and accessible for people with diabetes who need real-time blood-sugar data.
Sales of the system jumped 73% compared to the same quarter last year, to $433 million, making up the bulk of Abbott’s $600 million in sales of diabetes products overall. Company executives told Reuters that Abbott plans to increase its manufacturing capacity for the device by three to five times in the next few years.
Sales of the MitraClip product grew 30% in the quarter, to $169 million. While minimally invasive heart valve replacements are quickly growing industrywide, Abbott makes the only device that repairs instead of replaces mitral-valve tissue. On Monday, Abbott announced the approval of its next-generation MitraClip G4.
The HeartMate 3 left-ventricular assist device — a complex implantable machine that pumps a person’s blood during late-stage heart failure — saw strong sales growth in the quarter. The exact figure wasn’t released, but the company said that the 25% organic growth in its $201 million heart failure unit was driven by HeartMate 3 sales. That’s a device from the St. Jude portfolio.
But other St. Jude categories like heart-rhythm and neuromodulation systems saw sales declines. Sales of heart-rhythm devices likes pacemakers and defibrillators fell by 1% to $548 million, while sales of neuromodulation devices that treat pain with mild electric current fell 3% to $212 million.
Asked about that performance, White said, “I’m always disappointed that they’re not growing as fast as we’d like them to. But, I am pleased that we’ve seen sequential improvement quarter-to-quarter in almost all of them.”
Companywide, Abbott said it earned $1.47 billion in adjusted earnings, or 82 cents a share. That was 2 cents above the Wall Street forecast.
Sales amounted to $7.98 billion, narrowly missing analysts’ consensus target of $8 billion.
Abbott is now projecting full-year companywide organic sales growth of 7% to 8%, and adjusted diluted EPS in a range of $3.21 to $3.27. For the third quarter, Abbott announced adjusted EPS guidance of 83 cents to 85 cents.