Abbott Laboratories said while it continues to face supply chain challenges, hospital staffing shortages and inflation, the company expects those pressures to ease in 2023.
“While these factors remain headwinds, I'm cautiously optimistic that we're starting to see them peak and in some cases ease a bit,” CEO Robert Ford said in a Wednesday morning earnings call.
Sales of the company’s COVID-19 tests once again exceeded analyst estimates, while supply constraints and pandemic restrictions in China at the end of the year affected its medical device business.
The company’s nutrition business was affected by the shutdown of a baby formula plant in Sturgis, Michigan, after formula was recalled for bacterial contamination and the Food and Drug Administration found unsanitary conditions in an inspection. That plant is now the subject of a U.S. Department of Justice investigation.
In the fourth quarter, the company’s medical device sales were little changed from a year earlier at $3.75 billion, while diagnostics revenue decreased 26% and nutrition sales fell 11%.
“The operating environment still remains challenging. But it's not as challenging as we saw back in Q3 of 2022 in October,” Ford said. “There are definitely signs here of stability. There are signs of improvement, whether it's in the macroeconomic side, or whether it's specifically in the segments that we are competing in.”
Diabetes devices were Abbott’s largest and fastest-growing device segment by revenue, bringing in $1.27 billion in the fourth quarter. Most of the total, at $1.1 billion, was from sales of Abbott’s Freestyle Libre continuous glucose monitors.
For the full year, Libre sales climbed more than 21%, including 42% growth in the U.S. and in the mid-teens internationally, Ford said.
“Can we see a path for another 20% growth in 2023? Yeah, I can,” Ford said.
He also talked about the expansion of the CGMs to more patients who use basal insulin only as a “significant opportunity.”
Ford expects that to begin in the U.S., where there are about 4 million patients with Type 2 diabetes who take basal insulin, about a third of whom are covered by Medicare. The agency has proposed new draft coverage guidelines that would expand access to CGMs.
“I don't think it's a U.S.-only situation. I think this is going to start to expand across the world, given the clinical data that you see with Libre, and the impact that it has,” Ford said.
The company also will run a trial of a combined glucose and ketone sensor, and prepare for the launch of its Lingo platform, a new line of consumer wearables, starting in Europe this year.
Although test sales declined by double digits in the quarter, they still outpaced analyst estimates, largely due to continued demand for rapid COVID tests.
Of the $3.3 billion in diagnostics revenue for the quarter, COVID-19 testing accounted for $1.07 billion. J.P. Morgan analyst Robbie Marcus wrote that amount “came in above our forecast for $514M, with rapid test sales of $1.02B driving the majority of this.”
For all of 2022, the company’s diagnostics revenue increased 6% year-over-year.
“From a COVID perspective, in 2022 we actually sold more tests than then we sold in 2021,” Ford said.
In the future, while Abbott expects COVID testing sales to decline “significantly,” they still will remain an important part of the business, Ford said.
Excluding COVID test sales, Abbott expects organic sales growth in the high-single digits for 2023.
“If you take [testing and recalls] out of the equation, you go back to what we were growing pre-pandemic, which was high-single digits, 7% to 8% growth,” Ford said. “That's what we grew in 2022, again, excluding COVID and the impact of the recall products.”
The company forecasts about $2 billion in revenue from COVID tests for 2023 and expects diluted earnings per share of $3.05 to $3.25