NEW YORK – Abbott announced on Tuesday that it has lowered its full-year 2021 financial guidance as a result of a decline in COVID-19 testing.
The firm now expects diluted EPS between $4.30 and $4.50 for the full year and EPS for the second quarter of at least $1.00. The firm previously projected diluted EPS greater than $5.00 for the year. Abbott CEO Robert Ford said on a conference call to discuss the change in guidance that the firm "couldn't have anticipated what has occurred over the past several weeks," namely a "sharp and rapid decline in demand for COVID tests, particularly rapid tests."
Ford emphasized that the new guidance still reflects "strong double-digit growth" compared to 2020 and more than 30 percent growth compared to pre-pandemic EPS in the first quarter of 2019.
Investors reacted negatively to the lowered guidance, sending Abbott's shares down nearly 9 percent to $106.68 in Tuesday afternoon trade on the New York Stock Exchange.
Ford said the company's base business is returning to normal and has "strong momentum." Although the company increased research and development and sales, general, and administrative funding this year based on its original COVID-19 testing revenue expectations, it has removed a portion of that investment to "partially mitigate the earnings impact" from the decline in COVID test sales, Ford said. He said the firm is looking at a "couple hundred million dollars" of expense cuts but has prioritized its R&D spending.
He noted that there have been "significant reductions" in COVID-19 cases internationally and in the US, where daily new cases have declined more than 60 percent since mid-April. The accelerated rollout of vaccines globally and in the US along with "unexpected changes in health authority guidelines related to COVID testing for fully vaccinated individuals" is driving the decline, Ford said. Those new guidelines say fully vaccinated people no longer need to be tested, even if they're exposed to the virus.
He added that while the changes are positive and signal an "accelerated return to normalcy," the changes "suddenly and fundamentally impacted current and expected market demand for COVID testing, particularly for screening and surveillance with rapid testing."
In the second quarter, Abbott expects $1.1 billion in COVID-19 testing sales. For the full year, the projection is between $4 billion and $4.5 billion in COVID-19 testing sales. Ford said there has been a "sharp decline" in rapid point-of-care testing for COVID-19, while PCR laboratory-based testing has been steadily declining along the lines Abbott was projecting.
If there is a surge in COVID-19 cases, Ford said Abbott has the capacity to "be able to help out ... in a surge" and supply the market with more tests, although he said he questions whether there would be a significant demand for tests even with a surge. Abbott built new facilities and expanded existing facilities to manufacture COVID-19 tests but is now "reducing some of our facilities" in the US, Ford said. He emphasized that the reduction is "adjusting for a demand decline."
He said that Abbott still thinks it will be a leader in the category of COVID-19 testing, but that the category is "declining and declining a little bit faster than what we had forecasted." However, he also mentioned that Abbott still plans to launch a combined SARS-CoV-2 and influenza diagnostic test.
In the international markets, where vaccine rollout has been slower, Ford said he expects a similar decline in testing, particularly in developed countries as the vaccination rate accelerates. Although emerging markets still have a significant number of COVID-19 cases, they are on a decline, and the firm expects to see the test dynamic in the US move through the international markets.
Abbott has "multiple additional launches" of new products in the next several months in the base business, he added. There has been recovery in consumer-focused businesses, such as established pharmaceuticals, diabetes care, and nutrition, as well as recovery in hospital-based businesses like diagnostics and cardiovascular care.
Base business sales, including Abbott's nutrition, diabetes care, diagnostics, and cardiovascular segments, grew nearly 10 percent in the first quarter of 2021 compared to the same quarter in 2019. At the start of the second quarter, base business sales grew in the low-double digits compared to 2019. Ford said he expects the trend to continue over the course of the year.
Although the "rapidly changing environment" negatively impacted COVID-19 testing revenues and EPS forecast, Ford said Abbott's base business is "well-positioned for sustainable, strong growth."
The COVID-19 pandemic has advanced Abbott strategically and brought the company to customers and market segments it didn't previously reach, allowing it to "invest in a lot of growth platforms across the company" and accelerate rollouts of capital instruments such as the molecular Alinity m system and ID Now POC system, Ford said. That investment in the base business will "drive our strong long-term sustainable growth for years to come," he said.