07.20.23
Rank: #1 (Last year: #2)
$31.27 Billion ($43.65 Billion)
Prior Fiscal: $30.01 Billion
Percentage Change: +4.2%
R&D Expenditure: $2.88B
Best FY22 Quarter: Q1 $8.85B ($11.9B)
Latest Quarter: Q1 $6.58B ($9.7B)
No. of Employees: 115,000 (total)
Global Headquarters: Abbott Park, Ill.
KEY EXECUTIVES
Robert B. Ford, Board Chairman and CEO
Robert E. Funck Jr., Exec. VP, Finance
Philip Boudreau, Sr. VP, Finance, and CFO
Lisa D. Earnhardt, Exec. VP, Medical Devices
John F. Ginascol, Exec. VP, Core Diagnostics
Andrea Wainer, Exec. VP, Rapid and Molecular Diagnostics
Gregory A. Ahlberg, Sr. VP, Core Laboratory Diagnostics, Commercial Operations
Michael D. Dale, Sr. VP, Structural Heart
Louis H. Morrone, Sr. VP, Rapid Diagnostics
Michael J. Pederson, Sr. VP, Electrophysiology
Julie L. Tyler, Sr. VP, Abbott Vascular
Jared L. Watkin, Sr. VP, Diabetes Care
Randel W. Woodgrift, Sr. VP,Cardiac Rhythm Management
Consistency and discipline births successful outcomes.
— Robin S. Baker
Warren Buffett is nothing if not consistent.
For decades, the renowned “Oracle of Omaha” has doled out the same investing advice to novice capitalists, using baseball analogies and obscure terms like “circle of competence” and “three-dimensional chess” to explain his strategy. He is a practitioner of patience—virtually unheard of in this age of instant gratification—and prefers printed text research to digitized financial files.
“In the securities business, you literally every day have thousands of the major American corporations offered to you at a price and at a price that changes daily,” Buffett expounded in a 1985 televised profile. “And you don’t have to make any decisions. Nothing is forced upon you. There are no called strikes in the business. They may be wonderful pitches to swing at, but if you don’t know enough, you don’t have to swing. And you can sit there and watch thousands of pitches and finally you get one right there where you want it...and then you swing.”
Baseball metaphors were a favorite of the late Jack Welch as well. GE’s longtime CEO consistently employed a corporate leadership strategy known as “differentiation” during his two-decade tenure with the company. Often dubbed “rank-and-yank”—a term Welch absolutely abhorred—differentiation is a process by which managers assess employees based on performance and separate them into three categories: top 20%, middle 70%, and bottom 10%. Members of the latter group, obviously, are terminated.
“The New York Yankees function perfectly well as a team (much to the dismay of Red Sox fans like myself, I might add) with a highly transparent system of differentiation in place. Stars are lavishly rewarded; underperformers are shown the clubhouse exit,” Welch wrote in his 2005 business /management book “Winning,” which he co-authored with his wife Suzy. “...I am convinced that along with being the most efficient and effective way to run your company, differentiation also happens to be the fairest and the kindest. Ultimately, it makes winners out of everyone.”
Regardless of the target. Case in point: Stack ranking has traditionally not been employed by Abbott Laboratories to manage workers but executives have used the “rank-and-yank” concept to weed out product line and business unit underperformers—a practice Welch referred to as “hardware differentiation” in his book.
Former Abbott Chairman/CEO Miles D. White, for example, significantly revamped the company during his 21-year reign: first purchasing BASF’s Knoll pharmaceutical segment in 2001, then spinning off the firm’s hospital products business in 2004 (Hospira, acquired by Pfizer in 2015), jettisoning the animal health division in 2015 (to Zoetis), and finally transferring its vision care business in 2017 (to Johnson & Johnson). White’s eventual successor, Robert B. Ford, championed the same strategy while heading up the Medical Devices business, orchestrating the $25 billion acquisition of St. Jude Medical Inc. (its cardiovascular solutions complemented Abbott’s own), and the eventual $5.3 billion takeover of Alere Inc.
ANALYST INSIGHTS: After benefitting from a huge windfall in the form of COVID diagnostic tests during the pandemic, Abbott is back to focusing on organic and inorganic growth in its core businesses. The recent acquisition of Cardiovascular Systems Inc. should add nicely to its portfolio. Recent FDA clearances for newer versions of the Freestyle Libre platform will continue the growth of its market-leading diabetes platform. Expect Abbott to be back to strong year-over-year growth by Q4 when the pandemic bubble sales comparisons are behind them.
Such business unit differentiation was noticeably absent last year, but Abbott compensated for that dearth with product diversification, winning more than a half-dozen regulatory approvals/clearances and debuting several new innovations that bolstered its offerings in cardiac care, diabetes, and chronic pain management.
“In 2022 alone, we delivered a host of innovative new product approvals and launches...And our pipeline for the future remains very rich,” Ford told shareholders in Abbott’s latest annual report. “We have the technologies and opportunities we need to fuel both therapeutic advancement and robust growth for years to come. The key to...success in an environment like today’s is our diversified business strategy, which gives us defensive strength by protecting us from market downturns in particular businesses, and offensive strength by providing us more ways to compete and win.”
Ford closed his letter the same way he’s ended all annual shareholder messages since assuming the corner office—with the words “Abbott Proud.”
An interesting sign-off, considering Abbott experienced a mix of both proud and humbling moments in fiscal 2022.
Abbott’s most ignominious moment surely was the voluntary infant formula recall and manufacturing plant shutdown that sparked a nationwide formula shortage last winter and an eventual U.S. Justice Department investigation. The February 2022 recall affected three powdered baby formula brands (Alimentum, EleCare, Similac) produced at Abbott Nutrition’s Sturgis, Mich., facility; four infants were sickened by the tainted formula and two died.
A less opprobrious but still not boastful moment occurred in October with a second voluntary infant formula recall, but this revocation was far less extensive than the earlier action, involving “less than a day’s worth” of total formula used in the United States. Abbott instituted the second recall over bottlecap sealing issues, though no injuries or deaths were reported.
As dreadful as those recalls were, though, they nevertheless sparked some proud moments, too. Abbott increased formula production at two U.S. plants and shipped product from its facilities in Ireland and Spain to bulk up the U.S. formula supply in August, and extended rebates on competitive products through part of the fourth quarter. The company also plans to build a new $500 million nutrition facility in the United States for specialty and metabolic formulas.
Abbott Proud.
Infant formula recalls aside, Abbott pride manifested itself in numerous ways last year, mainly through a solid financial performance. Strong demand for COVID-19 diagnostic tests and growth in the Established Pharmaceutical Products and Medical Devices segments nudged total net sales 1.3% to $43.65 billion and earnings before taxes 1.2% to $8.3 billion. Barring the impacts of coronavirus test-related proceeds and foreign exchange, total net sales increased 5.1%.
Abbott’s higher revenue in FY22 stemmed from improved showings in three of its four business segments. Thanks to its recall troubles, Nutritionals was the only segment to lose money last year—sales slipped 10% to $7.45 billion. The company recouped that loss, however, with sound growth in its three other three segments, one of which benefitted considerably from the continuing need for coronavirus testing.
That segment was Diagnostics, which increased revenue 6% last year to $16.58 billion. COVID-19 testing-related transactions beget more than half that total ($8.4 billion), led by sales of Abbott’s BinaxNOW, Panbio, and ID NOW rapid testing platforms. SARS-CoV-2 testing sales have risen steadily over the past three years despite fluctuating caseloads, but that surge could dissipate as COVID-19 morphs into an endemic disease and federal testing funding dries up. “The availability of fast, accurate, and accessible testing was a major factor in the world’s response to the pandemic. The success of our actions built major new businesses for Abbott at unprecedented speed and, importantly for the long term, demonstrated the power and potential of rapid diagnostics,” Ford noted in Abbott’s 2022 annual report. “We showed the world the many benefits of testing—and of health technology broadly—that is decentralized, digitized, and democratized. So, while Covid testing will become a smaller part of our business as we move from a pandemic to an endemic level, Abbott has built a leading position for the promising future of rapid testing.”
That position is already paying off. 2022 Rapid Diagnostics sales spiked 18.9% to $10.1 billion, bolstered by high demand for COVID-19 rapid tests. Demand was considerably less robust last year for SARS-CoV-2 molecular assays—sales of those tests fell by more than half from 2021 ($891 million to $411 million) and 59% from 2020. Overall, Molecular business unit revenue plummeted 30.3% in fiscal 2022 to $995 million but sales actually rose 9% and 13.8% apart from coronavirus testing-related proceeds and foreign exchange rates, respectively.
The Point of Care and Core Laboratory units posted losses too, though not as severe: proceeds in the former slid 2.1% to $525 million while sales in the latter fell 4.7% to $4.8 billion due to lower turnover of lab-based coronavirus antibody detection tests and intermittent market disruptions in China. Specifically, COVID-19 testing revenue from Abbott’s ARCHITECT and Alinity i platforms were down a staggering 69.6% from 2021 and 76.3% from 2020. Yet, like the Molecular unit, Core Laboratory revenue rose barring the impact of foreign exchange and coronavirus testing-related sales, thanks to higher volumes of routine diagnostic assays from the continued rollout of Abbott’s Alinity platform and an expanded test menu.
The first new menu item was the Alinity m STI Assay, a test for simultaneously detecting and differentiating four common sexually transmitted infections (STIs). Cleared by the U.S. Food and Drug Administration (FDA) in early May 2022, the Alinity m STI test for Chlamydia trachomatis, Neisseria gonorrhoeae, Trichomonas vaginalis, and Mycoplasma genitalium requires one swab or urine sample collected in a healthcare setting by a clinician or patient. The test runs on Abbott’s Alinity m system, the company’s most advanced high-volume laboratory molecular instrument. Alinity m uses polymerase chain reaction (PCR) technology, with high sensitivity in detecting infectious diseases.
Five months after debuting the STI Assay, Abbott won FDA emergency use authorization (EUA) for a commercial Mpox virus test kit. The first to become commercially available through an EUA, the Alinity m MPXV assay is for use by CLIA-certified laboratories for detecting Mpox virus DNA from lesion swab samples. The assay can be used on Abbott’s Alinity m instrument or other authorized equipment that performs sample preparation, PCR assembly, amplification, detection, and result calculation and reporting.
“Over the next few years, Abbott will continue rolling out our Alinity family of harmonized systems, which are being designed to run more tests in less space, generate test results faster, and minimize human errors, while continuing to provide high-quality results,” Abbott’s annual report stated. “...our pipeline for the future remains very rich. We have the technologies and opportunities we need to fuel both therapeutic advancement and robust growth for years to come.”
Such technologies and opportunities transcend Diagnostics, though. Abbott’s Medical Devices segment enriched its product pipeline last year to ensure future growth and improve cardiac care, electrophysiology, and glucose control therapeutics. Total Medical Devices sales expanded 2.2% (8.1% excluding foreign exchange rates) to $14.7 billion on strong performances in the Diabetes Care, Structural Heart, Electrophysiology, and Heart Failure segments.
Diabetes Care revenue ballooned 9.9% last year to $4.75 billion, driven by continued growth at home (United States) and abroad of Abbott’s continuous glucose monitoring (CGM) system, the FreeStyle Libre, which comprised 90.5% ($4.3 billion) of the unit’s FY22 total proceeds. The company further enhanced its FreeStyle Libre offering in May with the FDA clearance of the next-generation FreeStyle Libre 3 system, made for diabetics aged 4 and older. With a 7.9% overall mean absolute relative difference, Abbott claims its FreeStyle Libre 3 system is the most accurate CGM, with readings sent directly to a smartphone every minute. The device is the size of two stacked U.S. pennies and is made to be worn on the back of the arm; it features a Bluetooth integration range of up to 33 feet—50% further than other CGMs—and was cleared for use with the FreeStyle Libre 3 iOS and Android mobile apps.
Further Diabetes Care diversification is likely to come from Abbott’s partnership with CamDiab and Ypsomed. The trio is developing an integrated automated insulin delivery (AID) system to help reduce the burden of round-the-clock diabetes management. The alliance’s initial focus will be in European countries.
The new integrated AID system will connect Abbott’s FreeStyle Libre 3 sensor to CamDiab’s CamAPS FX mobile app, which then will link with Ypsomed’s mylife YpsoPump—creating a smart, automated insulin delivery process based on real-time glucose data. The connected, wearable solution will constantly monitor glucose levels and automatically adjust and deliver proper insulin amounts at the appropriate time, thus removing insulin dosing guesswork.
“Our goal is to make diabetes care as easy as possible, which is why Abbott continues to expand its team of insulin delivery partners, digital coaching, and technology leaders,” Jared Watkin, senior vice president of Abbott’s Diabetes Care unit, said when the partnership was announced last spring. “We want to deliver new advanced solutions that simplify and make it possible for people to spend less time thinking about diabetes and more about living.”
Abbott also wants fewer pensive moments dedicated to cardiovascular disease and chronic pain management. Accordingly, the company augmented its portfolio in both areas last year through nearly a dozen product approvals and market introductions, beginning with the FDA’s clearance in January of the EnSite X EP System with EnSite Omnipolar Technology, a new cardiac mapping system designed to improve cardiac arrhythmia treatment. The system creates highly detailed three-dimensional heart maps to help doctors identify and treat areas of the heart where abnormal rhythms originate. The system includes Abbott’s proprietary EnSite OT, which leverages the Advisor HD Grid Catheter to provide true electrograms regardless of a catheter’s orientation within the heart. With the ability to sample EGMs in 360 degrees, the EnSite X EP System with EnSite OT can map 1 million points in the heart and provide more precise treatment area locations.
The EnSite X EP, along with higher procedure volumes, helped boost Abbott’s FY22 Electrophysiology unit sales 1.04% (7.3%, excluding the impact of foreign exchange) to $1.92 billion.
Heart Failure unit revenue climbed 3.5% to $920 million. Abbott ensured future growth in this treatment area by securing an expanded FDA indication last winter for the CardioMEMS HF System, whose early warning sensor technology enables doctors to guard against worsening heart failure. The new indication adds an estimated 1.2 million potential U.S. patients to the CardioMEMS treatment pool by authorizing the device’s use by Class II heart failure victims and those with elevated natriuretic peptide levels in their blood. The CardioMEMS HF System was initially approved in 2014 for Class III heart failure patients with a prior heart failure hospitalization within the last year.
“Heart failure is a race against time where too often we’re behind because patients are not getting care early enough,” Philip B. Adamson, M.D., chief medical officer of the Heart Failure unit, noted in announcing the CardioMEMS expanded indication. “This expanded indication means physicians can treat more people with earlier-stage heart failure, providing the opportunity to prevent further suffering and possibly avoid later-stage progression that can have a profound impact on a person’s quality of life.”
Leaky heart valves and abnormal heart rhythms can impact quality of life as well, thus prompting Abbott to release two Amplatzer devices to the U.S. and European market in 2022. The company’s Amplatzer Steerable Delivery Sheath became available in the United States last spring, while the Amplatzer Talisman PFO Occlusion System launched in Europe in September.
The Amplatzer Steerable Delivery Sheath is used with Abbott’s Amplatzer Amulet Left Atrial Appendage Occluder to treat atrial fibrillation, a condition that increases the risk of ischemic stroke. The Talisman PFO Occlusion System treats patients with patent foramen ovale—i.e., a hole in the heart—who have experienced a stroke and are prone to suffering another.
Surprisingly though, neither new Amplatzer release moved the needle forward (financially, at least) in the Structural Heart unit in fiscal 2022. Rather, the Amplatzer Amulet Left Atrial Appendage Occluder—approved by the FDA in 2021—and the MitraClip (authorized in 2013) topped sales, inducing a 6.34% revenue increase (13%, excluding the impact of foreign exchange) to $1.71 billion.
Growth in Electrophysiology, Heart Failure, Structural Heart, and Diabetes helped offset losses in the Medical Devices segment’s three other business units, which succumbed to new coronavirus surges, intermittent pandemic-related lockdowns in China, and healthcare staffing challenges throughout 2022. Vascular proceeds declined 6.4% to $2.48 billion due to lower average selling prices for traditional drug-eluting stents and other coronary products as well as a slower recovery of percutaneous coronary intervention procedures.
Rhythm Management sales slid 3.6% to $2.11 billion despite the April 2022 FDA approval of the Aveir single-chamber leadless pacemaker for treating slow heart rhythms in U. S. patients. Implanted directly inside the heart’s right ventricle, the Aveir pacemaker features a mapping capability that allows physicians to measure the heart’s electrical signals and determine the device’s correct placement before final implantation. Its battery lasts up to two times longer than other commercially available leadless pacemakers, and the device itself can be retrieved if necessary.
Neuromodulation experienced the same fate as Rhythm Management: Revenue fell 1.4% to $770 million in spite of several new innovations, the first of which was new expanded MRI compatibility for the Proclaim XR Spinal Cord Stimulation (SCS) System with Octrode leads. Approved by the FDA in January, the expanded compatibility essentially lifted magnetic resonance imaging restrictions for lead tip location and the amount of radiofrequency power permissible under an MRI scan’s normal operating mode.
Six months after gaining the expanded compatibility for Proclaim XR, Abbott won FDA Breakthrough Device Designation to investigate using its deep brain stimulation (DBS) system for treatment-resistant depression (TRD), a form of major depressive disorder. The company’s DBS system is a personalized, adjustable therapy that entails implanting thin wires (or leads) into targeted areas of the brain. A pulse generator implanted under the skin in the chest is connected to the leads and produces electrical impulses that can modulate abnormal brain activity. Abbott has traditionally used its DBS system to help control symptoms of movement disorders (Parkinson’s disease, essential tremor) but evidence suggests that implanting electrodes in the part of the brain that regulates mood could help reduce TRD symptoms.
In late August—six weeks after nabbing the Breakthrough Device Designation—Abbott received FDA approval for its new Proclaim Plus SCS system featuring FlexBurst360 therapy. Hailed as the next generation of Abbott’s proprietary BurstDR stimulation, which delivers pulses (or bursts) of mild electrical energy to alter pain signals on their journey from the spinal cord to the brain, FlexBurst350 therapy provides pain relief in up to six areas of the trunk and/or limbs and features adjustable programming for evolving therapeutic needs.
The Proclaim Plus SCS system needs no recharging, as its battery can last up to a decade. It can be used with Abbott’s NeuroSphere Virtual Clinic connected care technology, which allows patients to communicate with a physician through a secure in-app video chat and remotely receive stimulation settings in real time regardless of location.
Abbott secured its final neuromodulation-related FDA approval shortly before Christmas last year, gaining the agency’s blessing for its Eterna SCS system—the smallest implantable, rechargeable spinal cord stimulator currently available for treating chronic pain. Developed from studies with patients, physicians, and caregivers, the company designed Eterna to need recharging less than five times per year under normal use. The product uses BurstDR stimulation, which mimics natural firing patterns in the brain to relieve pain. Eterna also features Abbott’s TotalScan technology, which allows for full-body MRI scans.
“Abbott’s low-dose BurstDR stimulation is clinically proven to reduce pain, improve people’s ability to perform everyday activities, and reduce emotional suffering associated with pain,” Timothy Deer, M.D., president/CEO of the Spine and Nerve centers of the Virginias (Charleston, W.V.), stated upon the Eterna’s FDA approval. “Until now, it wasn’t available on a rechargeable device that was this small, and that only needs to be charged a few times a year. This makes a big difference in comfort for many patients who now can have access to the best of both worlds—a small, best-in-class rechargeable device with superior stimulation therapy.”
$31.27 Billion ($43.65 Billion)
Prior Fiscal: $30.01 Billion
Percentage Change: +4.2%
R&D Expenditure: $2.88B
Best FY22 Quarter: Q1 $8.85B ($11.9B)
Latest Quarter: Q1 $6.58B ($9.7B)
No. of Employees: 115,000 (total)
Global Headquarters: Abbott Park, Ill.
KEY EXECUTIVES
Robert B. Ford, Board Chairman and CEO
Robert E. Funck Jr., Exec. VP, Finance
Philip Boudreau, Sr. VP, Finance, and CFO
Lisa D. Earnhardt, Exec. VP, Medical Devices
John F. Ginascol, Exec. VP, Core Diagnostics
Andrea Wainer, Exec. VP, Rapid and Molecular Diagnostics
Gregory A. Ahlberg, Sr. VP, Core Laboratory Diagnostics, Commercial Operations
Michael D. Dale, Sr. VP, Structural Heart
Louis H. Morrone, Sr. VP, Rapid Diagnostics
Michael J. Pederson, Sr. VP, Electrophysiology
Julie L. Tyler, Sr. VP, Abbott Vascular
Jared L. Watkin, Sr. VP, Diabetes Care
Randel W. Woodgrift, Sr. VP,Cardiac Rhythm Management
Consistency and discipline births successful outcomes.
— Robin S. Baker
Warren Buffett is nothing if not consistent.
For decades, the renowned “Oracle of Omaha” has doled out the same investing advice to novice capitalists, using baseball analogies and obscure terms like “circle of competence” and “three-dimensional chess” to explain his strategy. He is a practitioner of patience—virtually unheard of in this age of instant gratification—and prefers printed text research to digitized financial files.
“In the securities business, you literally every day have thousands of the major American corporations offered to you at a price and at a price that changes daily,” Buffett expounded in a 1985 televised profile. “And you don’t have to make any decisions. Nothing is forced upon you. There are no called strikes in the business. They may be wonderful pitches to swing at, but if you don’t know enough, you don’t have to swing. And you can sit there and watch thousands of pitches and finally you get one right there where you want it...and then you swing.”
Baseball metaphors were a favorite of the late Jack Welch as well. GE’s longtime CEO consistently employed a corporate leadership strategy known as “differentiation” during his two-decade tenure with the company. Often dubbed “rank-and-yank”—a term Welch absolutely abhorred—differentiation is a process by which managers assess employees based on performance and separate them into three categories: top 20%, middle 70%, and bottom 10%. Members of the latter group, obviously, are terminated.
“The New York Yankees function perfectly well as a team (much to the dismay of Red Sox fans like myself, I might add) with a highly transparent system of differentiation in place. Stars are lavishly rewarded; underperformers are shown the clubhouse exit,” Welch wrote in his 2005 business /management book “Winning,” which he co-authored with his wife Suzy. “...I am convinced that along with being the most efficient and effective way to run your company, differentiation also happens to be the fairest and the kindest. Ultimately, it makes winners out of everyone.”
Regardless of the target. Case in point: Stack ranking has traditionally not been employed by Abbott Laboratories to manage workers but executives have used the “rank-and-yank” concept to weed out product line and business unit underperformers—a practice Welch referred to as “hardware differentiation” in his book.
Former Abbott Chairman/CEO Miles D. White, for example, significantly revamped the company during his 21-year reign: first purchasing BASF’s Knoll pharmaceutical segment in 2001, then spinning off the firm’s hospital products business in 2004 (Hospira, acquired by Pfizer in 2015), jettisoning the animal health division in 2015 (to Zoetis), and finally transferring its vision care business in 2017 (to Johnson & Johnson). White’s eventual successor, Robert B. Ford, championed the same strategy while heading up the Medical Devices business, orchestrating the $25 billion acquisition of St. Jude Medical Inc. (its cardiovascular solutions complemented Abbott’s own), and the eventual $5.3 billion takeover of Alere Inc.
ANALYST INSIGHTS: After benefitting from a huge windfall in the form of COVID diagnostic tests during the pandemic, Abbott is back to focusing on organic and inorganic growth in its core businesses. The recent acquisition of Cardiovascular Systems Inc. should add nicely to its portfolio. Recent FDA clearances for newer versions of the Freestyle Libre platform will continue the growth of its market-leading diabetes platform. Expect Abbott to be back to strong year-over-year growth by Q4 when the pandemic bubble sales comparisons are behind them.
—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors
Such business unit differentiation was noticeably absent last year, but Abbott compensated for that dearth with product diversification, winning more than a half-dozen regulatory approvals/clearances and debuting several new innovations that bolstered its offerings in cardiac care, diabetes, and chronic pain management.
“In 2022 alone, we delivered a host of innovative new product approvals and launches...And our pipeline for the future remains very rich,” Ford told shareholders in Abbott’s latest annual report. “We have the technologies and opportunities we need to fuel both therapeutic advancement and robust growth for years to come. The key to...success in an environment like today’s is our diversified business strategy, which gives us defensive strength by protecting us from market downturns in particular businesses, and offensive strength by providing us more ways to compete and win.”
Ford closed his letter the same way he’s ended all annual shareholder messages since assuming the corner office—with the words “Abbott Proud.”
An interesting sign-off, considering Abbott experienced a mix of both proud and humbling moments in fiscal 2022.
Abbott’s most ignominious moment surely was the voluntary infant formula recall and manufacturing plant shutdown that sparked a nationwide formula shortage last winter and an eventual U.S. Justice Department investigation. The February 2022 recall affected three powdered baby formula brands (Alimentum, EleCare, Similac) produced at Abbott Nutrition’s Sturgis, Mich., facility; four infants were sickened by the tainted formula and two died.
A less opprobrious but still not boastful moment occurred in October with a second voluntary infant formula recall, but this revocation was far less extensive than the earlier action, involving “less than a day’s worth” of total formula used in the United States. Abbott instituted the second recall over bottlecap sealing issues, though no injuries or deaths were reported.
As dreadful as those recalls were, though, they nevertheless sparked some proud moments, too. Abbott increased formula production at two U.S. plants and shipped product from its facilities in Ireland and Spain to bulk up the U.S. formula supply in August, and extended rebates on competitive products through part of the fourth quarter. The company also plans to build a new $500 million nutrition facility in the United States for specialty and metabolic formulas.
Abbott Proud.
Infant formula recalls aside, Abbott pride manifested itself in numerous ways last year, mainly through a solid financial performance. Strong demand for COVID-19 diagnostic tests and growth in the Established Pharmaceutical Products and Medical Devices segments nudged total net sales 1.3% to $43.65 billion and earnings before taxes 1.2% to $8.3 billion. Barring the impacts of coronavirus test-related proceeds and foreign exchange, total net sales increased 5.1%.
Abbott’s higher revenue in FY22 stemmed from improved showings in three of its four business segments. Thanks to its recall troubles, Nutritionals was the only segment to lose money last year—sales slipped 10% to $7.45 billion. The company recouped that loss, however, with sound growth in its three other three segments, one of which benefitted considerably from the continuing need for coronavirus testing.
That segment was Diagnostics, which increased revenue 6% last year to $16.58 billion. COVID-19 testing-related transactions beget more than half that total ($8.4 billion), led by sales of Abbott’s BinaxNOW, Panbio, and ID NOW rapid testing platforms. SARS-CoV-2 testing sales have risen steadily over the past three years despite fluctuating caseloads, but that surge could dissipate as COVID-19 morphs into an endemic disease and federal testing funding dries up. “The availability of fast, accurate, and accessible testing was a major factor in the world’s response to the pandemic. The success of our actions built major new businesses for Abbott at unprecedented speed and, importantly for the long term, demonstrated the power and potential of rapid diagnostics,” Ford noted in Abbott’s 2022 annual report. “We showed the world the many benefits of testing—and of health technology broadly—that is decentralized, digitized, and democratized. So, while Covid testing will become a smaller part of our business as we move from a pandemic to an endemic level, Abbott has built a leading position for the promising future of rapid testing.”
That position is already paying off. 2022 Rapid Diagnostics sales spiked 18.9% to $10.1 billion, bolstered by high demand for COVID-19 rapid tests. Demand was considerably less robust last year for SARS-CoV-2 molecular assays—sales of those tests fell by more than half from 2021 ($891 million to $411 million) and 59% from 2020. Overall, Molecular business unit revenue plummeted 30.3% in fiscal 2022 to $995 million but sales actually rose 9% and 13.8% apart from coronavirus testing-related proceeds and foreign exchange rates, respectively.
The Point of Care and Core Laboratory units posted losses too, though not as severe: proceeds in the former slid 2.1% to $525 million while sales in the latter fell 4.7% to $4.8 billion due to lower turnover of lab-based coronavirus antibody detection tests and intermittent market disruptions in China. Specifically, COVID-19 testing revenue from Abbott’s ARCHITECT and Alinity i platforms were down a staggering 69.6% from 2021 and 76.3% from 2020. Yet, like the Molecular unit, Core Laboratory revenue rose barring the impact of foreign exchange and coronavirus testing-related sales, thanks to higher volumes of routine diagnostic assays from the continued rollout of Abbott’s Alinity platform and an expanded test menu.
The first new menu item was the Alinity m STI Assay, a test for simultaneously detecting and differentiating four common sexually transmitted infections (STIs). Cleared by the U.S. Food and Drug Administration (FDA) in early May 2022, the Alinity m STI test for Chlamydia trachomatis, Neisseria gonorrhoeae, Trichomonas vaginalis, and Mycoplasma genitalium requires one swab or urine sample collected in a healthcare setting by a clinician or patient. The test runs on Abbott’s Alinity m system, the company’s most advanced high-volume laboratory molecular instrument. Alinity m uses polymerase chain reaction (PCR) technology, with high sensitivity in detecting infectious diseases.
Five months after debuting the STI Assay, Abbott won FDA emergency use authorization (EUA) for a commercial Mpox virus test kit. The first to become commercially available through an EUA, the Alinity m MPXV assay is for use by CLIA-certified laboratories for detecting Mpox virus DNA from lesion swab samples. The assay can be used on Abbott’s Alinity m instrument or other authorized equipment that performs sample preparation, PCR assembly, amplification, detection, and result calculation and reporting.
“Over the next few years, Abbott will continue rolling out our Alinity family of harmonized systems, which are being designed to run more tests in less space, generate test results faster, and minimize human errors, while continuing to provide high-quality results,” Abbott’s annual report stated. “...our pipeline for the future remains very rich. We have the technologies and opportunities we need to fuel both therapeutic advancement and robust growth for years to come.”
Such technologies and opportunities transcend Diagnostics, though. Abbott’s Medical Devices segment enriched its product pipeline last year to ensure future growth and improve cardiac care, electrophysiology, and glucose control therapeutics. Total Medical Devices sales expanded 2.2% (8.1% excluding foreign exchange rates) to $14.7 billion on strong performances in the Diabetes Care, Structural Heart, Electrophysiology, and Heart Failure segments.
Diabetes Care revenue ballooned 9.9% last year to $4.75 billion, driven by continued growth at home (United States) and abroad of Abbott’s continuous glucose monitoring (CGM) system, the FreeStyle Libre, which comprised 90.5% ($4.3 billion) of the unit’s FY22 total proceeds. The company further enhanced its FreeStyle Libre offering in May with the FDA clearance of the next-generation FreeStyle Libre 3 system, made for diabetics aged 4 and older. With a 7.9% overall mean absolute relative difference, Abbott claims its FreeStyle Libre 3 system is the most accurate CGM, with readings sent directly to a smartphone every minute. The device is the size of two stacked U.S. pennies and is made to be worn on the back of the arm; it features a Bluetooth integration range of up to 33 feet—50% further than other CGMs—and was cleared for use with the FreeStyle Libre 3 iOS and Android mobile apps.
Further Diabetes Care diversification is likely to come from Abbott’s partnership with CamDiab and Ypsomed. The trio is developing an integrated automated insulin delivery (AID) system to help reduce the burden of round-the-clock diabetes management. The alliance’s initial focus will be in European countries.
The new integrated AID system will connect Abbott’s FreeStyle Libre 3 sensor to CamDiab’s CamAPS FX mobile app, which then will link with Ypsomed’s mylife YpsoPump—creating a smart, automated insulin delivery process based on real-time glucose data. The connected, wearable solution will constantly monitor glucose levels and automatically adjust and deliver proper insulin amounts at the appropriate time, thus removing insulin dosing guesswork.
“Our goal is to make diabetes care as easy as possible, which is why Abbott continues to expand its team of insulin delivery partners, digital coaching, and technology leaders,” Jared Watkin, senior vice president of Abbott’s Diabetes Care unit, said when the partnership was announced last spring. “We want to deliver new advanced solutions that simplify and make it possible for people to spend less time thinking about diabetes and more about living.”
Abbott also wants fewer pensive moments dedicated to cardiovascular disease and chronic pain management. Accordingly, the company augmented its portfolio in both areas last year through nearly a dozen product approvals and market introductions, beginning with the FDA’s clearance in January of the EnSite X EP System with EnSite Omnipolar Technology, a new cardiac mapping system designed to improve cardiac arrhythmia treatment. The system creates highly detailed three-dimensional heart maps to help doctors identify and treat areas of the heart where abnormal rhythms originate. The system includes Abbott’s proprietary EnSite OT, which leverages the Advisor HD Grid Catheter to provide true electrograms regardless of a catheter’s orientation within the heart. With the ability to sample EGMs in 360 degrees, the EnSite X EP System with EnSite OT can map 1 million points in the heart and provide more precise treatment area locations.
The EnSite X EP, along with higher procedure volumes, helped boost Abbott’s FY22 Electrophysiology unit sales 1.04% (7.3%, excluding the impact of foreign exchange) to $1.92 billion.
Heart Failure unit revenue climbed 3.5% to $920 million. Abbott ensured future growth in this treatment area by securing an expanded FDA indication last winter for the CardioMEMS HF System, whose early warning sensor technology enables doctors to guard against worsening heart failure. The new indication adds an estimated 1.2 million potential U.S. patients to the CardioMEMS treatment pool by authorizing the device’s use by Class II heart failure victims and those with elevated natriuretic peptide levels in their blood. The CardioMEMS HF System was initially approved in 2014 for Class III heart failure patients with a prior heart failure hospitalization within the last year.
“Heart failure is a race against time where too often we’re behind because patients are not getting care early enough,” Philip B. Adamson, M.D., chief medical officer of the Heart Failure unit, noted in announcing the CardioMEMS expanded indication. “This expanded indication means physicians can treat more people with earlier-stage heart failure, providing the opportunity to prevent further suffering and possibly avoid later-stage progression that can have a profound impact on a person’s quality of life.”
Leaky heart valves and abnormal heart rhythms can impact quality of life as well, thus prompting Abbott to release two Amplatzer devices to the U.S. and European market in 2022. The company’s Amplatzer Steerable Delivery Sheath became available in the United States last spring, while the Amplatzer Talisman PFO Occlusion System launched in Europe in September.
The Amplatzer Steerable Delivery Sheath is used with Abbott’s Amplatzer Amulet Left Atrial Appendage Occluder to treat atrial fibrillation, a condition that increases the risk of ischemic stroke. The Talisman PFO Occlusion System treats patients with patent foramen ovale—i.e., a hole in the heart—who have experienced a stroke and are prone to suffering another.
Surprisingly though, neither new Amplatzer release moved the needle forward (financially, at least) in the Structural Heart unit in fiscal 2022. Rather, the Amplatzer Amulet Left Atrial Appendage Occluder—approved by the FDA in 2021—and the MitraClip (authorized in 2013) topped sales, inducing a 6.34% revenue increase (13%, excluding the impact of foreign exchange) to $1.71 billion.
Growth in Electrophysiology, Heart Failure, Structural Heart, and Diabetes helped offset losses in the Medical Devices segment’s three other business units, which succumbed to new coronavirus surges, intermittent pandemic-related lockdowns in China, and healthcare staffing challenges throughout 2022. Vascular proceeds declined 6.4% to $2.48 billion due to lower average selling prices for traditional drug-eluting stents and other coronary products as well as a slower recovery of percutaneous coronary intervention procedures.
Rhythm Management sales slid 3.6% to $2.11 billion despite the April 2022 FDA approval of the Aveir single-chamber leadless pacemaker for treating slow heart rhythms in U. S. patients. Implanted directly inside the heart’s right ventricle, the Aveir pacemaker features a mapping capability that allows physicians to measure the heart’s electrical signals and determine the device’s correct placement before final implantation. Its battery lasts up to two times longer than other commercially available leadless pacemakers, and the device itself can be retrieved if necessary.
Neuromodulation experienced the same fate as Rhythm Management: Revenue fell 1.4% to $770 million in spite of several new innovations, the first of which was new expanded MRI compatibility for the Proclaim XR Spinal Cord Stimulation (SCS) System with Octrode leads. Approved by the FDA in January, the expanded compatibility essentially lifted magnetic resonance imaging restrictions for lead tip location and the amount of radiofrequency power permissible under an MRI scan’s normal operating mode.
Six months after gaining the expanded compatibility for Proclaim XR, Abbott won FDA Breakthrough Device Designation to investigate using its deep brain stimulation (DBS) system for treatment-resistant depression (TRD), a form of major depressive disorder. The company’s DBS system is a personalized, adjustable therapy that entails implanting thin wires (or leads) into targeted areas of the brain. A pulse generator implanted under the skin in the chest is connected to the leads and produces electrical impulses that can modulate abnormal brain activity. Abbott has traditionally used its DBS system to help control symptoms of movement disorders (Parkinson’s disease, essential tremor) but evidence suggests that implanting electrodes in the part of the brain that regulates mood could help reduce TRD symptoms.
In late August—six weeks after nabbing the Breakthrough Device Designation—Abbott received FDA approval for its new Proclaim Plus SCS system featuring FlexBurst360 therapy. Hailed as the next generation of Abbott’s proprietary BurstDR stimulation, which delivers pulses (or bursts) of mild electrical energy to alter pain signals on their journey from the spinal cord to the brain, FlexBurst350 therapy provides pain relief in up to six areas of the trunk and/or limbs and features adjustable programming for evolving therapeutic needs.
The Proclaim Plus SCS system needs no recharging, as its battery can last up to a decade. It can be used with Abbott’s NeuroSphere Virtual Clinic connected care technology, which allows patients to communicate with a physician through a secure in-app video chat and remotely receive stimulation settings in real time regardless of location.
Abbott secured its final neuromodulation-related FDA approval shortly before Christmas last year, gaining the agency’s blessing for its Eterna SCS system—the smallest implantable, rechargeable spinal cord stimulator currently available for treating chronic pain. Developed from studies with patients, physicians, and caregivers, the company designed Eterna to need recharging less than five times per year under normal use. The product uses BurstDR stimulation, which mimics natural firing patterns in the brain to relieve pain. Eterna also features Abbott’s TotalScan technology, which allows for full-body MRI scans.
“Abbott’s low-dose BurstDR stimulation is clinically proven to reduce pain, improve people’s ability to perform everyday activities, and reduce emotional suffering associated with pain,” Timothy Deer, M.D., president/CEO of the Spine and Nerve centers of the Virginias (Charleston, W.V.), stated upon the Eterna’s FDA approval. “Until now, it wasn’t available on a rechargeable device that was this small, and that only needs to be charged a few times a year. This makes a big difference in comfort for many patients who now can have access to the best of both worlds—a small, best-in-class rechargeable device with superior stimulation therapy.”