Abbott to cut 1,900 commercial & manufacturing jobs in US

By Nick Taylor

- Last updated on GMT

Related tags: Abbott, Revenue

Abbott Laboratories is to cut 1,900 US commercial and manufacturing jobs in response to healthcare reform and tough regulators.

For Abbott and its peers 2010 was one of the most difficult years ever and the market will remain challenging, said Miles White, CEO of the company. To reposition Abbott has cut jobs, including 3,000 integrating Solvay, and this continues with a further 1,900 layoffs planned for coming years.

In justification of the cuts Abbott cited the impact of healthcare reform and regulatory challenges. “It is frankly more difficult to get products approved​”, said White in an investor conference call, adding that companies are navigating a regulatory system “that currently says no more than yes​”.

Cuts will be made to US pharmaceutical commercial and manufacturing operations over the next several years and cost Abbott $295m (€215m) in total. Almost half of this expenditure will occur in the first quarter of fiscal 2011 and $95m of it is budgeted for moving manufacturing to other sites.

Staffing levels in Illinois will be cut by 1,000, according to the Chicago Tribune​, and 500 were notified of their departures yesterday. The remaining 500 cuts will be made over the next few years.

Abbott shares closed the day down 2.5 per cent at $46.75. In its fourth quarter results, which detailed the cuts, Abbott posted a two per cent dip in operating profit. This drop occurred despite 23 per cent growth in pharmaceutical sales driving a double-digit increase in total revenues.

Integration of Solvay Pharmaceuticals and Piramal Healthcare Solutions helped revenue growth but many existing Abbott products also performed strongly. Exceptions include Kaletra (lopinavir), revenues from which, driven by declining US sales, dropped 10 per cent in the fourth quarter.

The importance of Humira

Humira (adalimumab) maintained double-digit growth in the quarter but the future of the product, which had full year sales of $6.5bn, remains a source of concern for some investors. Concerns surround patent expiration, due in 2016, and the impact biosimilar competition will have on sales.

Abbott acknowledges Humira growth will slow but thinks some investors have overestimated how quickly biosimilar competition will make an impact. “A lot of the fears around Humira have been overblown​”, said White, and as such Abbott expects it to remain important for a long time.

However, Humira growth will stop at sometime and Abbott is preparing alternative revenue sources. Emerging markets are an important element of this strategy and investments Abbott has made in this area, notably India, will prove their value over the next five to 10 years, said White.

Abbott also expects its diversified business, which covers nutritional products, medical devices and, now, branded generics, to support it through challenges to patented pharmaceuticals. The generics division is expected to generate revenues of $5bn in 2011.

In response to an investor’s question White said Abbott has no intention of breaking up the company and, furthermore, being diversified has helped the company in recent years.

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