Abbott Laboratories’ COVID-19 diagnostic business helped drive sales growth in the second quarter as demand for coronavirus tests rose more than expected.
The company reported $2.3 billion in COVID-19 testing-related sales for the second quarter, about $1 billion more than J.P. Morgan and Stifel analysts estimated. Still, sales dropped by $1 billion compared to the first quarter, spurring questions about what demand may be going forward.
CEO Robert Ford acknowledged during a Wednesday earnings call that while testing demand is a bit uncertain at the moment, the business is not going away.
“All the data shows that testing is still here,” Ford said. “Cases are up, our test sales are actually up, and our tests have done very well … and become somewhat of a preferred format over here.”
J.P. Morgan analysts wrote in a Wednesday note that the $2.3 billion reported in COVID-19 testing sales was “well above our forecast for $1.11B.” Ford said that rapid COVID-19 tests made up about 95% of revenue.
Abbott’s forecast for 2022 sales has $6.1 billion of COVID-19 testing-related sales built in. Still, the company said in its earnings report that the outlook includes $5.6 billion of sales that were captured through June, with the remaining $500 million expected to come “over the next few months.”
Ford told investors that anticipating demand for COVID-19 testing remains challenging. The CEO said that last year the company was questioning if there would be any demand in 2022, but Abbott has shipped the same amount of tests in the first six months of this year compared to all of 2021.
Forecasting testing demand beyond three to six months is difficult, Ford added.
While Abbott recorded better-than-expected growth in COVID-19 testing, its base business showed little growth. Worldwide sales decreased by 0.3% on a reported basis when excluding coronavirus testing-related sales.
Abbott’s sales were hurt by the recall of infant formula and a shutdown of a manufacturing plant. RBC Capital Markets analysts wrote in a Wednesday report that the formula recall resulted in a sales decline of about $165 million last quarter.
The company also faced larger trends like elective procedures not returning at the rate it expected.
Ford attributed the drag on procedures to three factors: lockdowns in China from rising COVID-19 cases, hospital staffing shortages in the U.S. and backorders on products due to the timing of availability of certain materials used to make devices.
“If I look at Abbott's procedure volumes and sales, they're actually higher than pre-pandemic levels, and there was sequential growth from [Q1 to Q2] — over 7% in the U.S. and a little bit lower internationally,” Ford said. “We are seeing growth, but it was a little bit more modest than what we had anticipated back in April.”
With COVID-19 cases rising again and the threat of an economic slowdown or recession looming, the CEO sought to assure investors that Abbott was positioned to navigate those challenges, pointing to the company’s diversification and overall resilience of the healthcare industry in general.