Ebb & Flow
Abbott was the latest pharma company to issue an earnings surprise, and the news was not met kindly. ABT was down $8.61 (19%) to $36.75 on the week after tumbling $7.37 (16%) to $38.30 on 24.7 million shares on Tuesday's news that it lowered its EPS guidance for the second quarter to $0.51 from $0.53 and for the full year to $2.06-$2.10 from $2.24-$2.26.
Going into last week, ABT had been one of the top pharma performers since the group peaked at the end of 2000. The company's market cap had declined only 6%, making it the second-best big pharma performer over that period, behind only Johnson & Johnson (JNJ, up 15%). ABT had been helped by its diversified portfolio of healthcare products (drugs, diagnostics and devices) and strong growth from Meridia/Reductil obesity drug and its Kaletra lopinavir/ritonavir HIV product.
But a May notice from FDA that ABT's Lake County diagnostic manufacturing operations do not conform with the agency's quality standards; slower sales of Meridia and unfavorable currency exchange have turned that around. Last week's fall demoted the company from the mid-cap pharma group ($70-$99 billion) and into the small cap group (<$70 billion). The selloff erased $13.4 billion from ABT's market cap, which now stands at $57.3 billion. The stock hit a new 52-week low on Wednesday at $35.25.
The fall would have been more severe had ABT not gotten a boost on Friday's encouraging Phase III data from D2E7, a monoclonal antibody licensed from Cambridge Antibody (LSE:CAT; CATG) (see Milestone Watch, A14). ABT added $0.80 to $36.75 on 7.3 million shares on Friday.
$300 million and counting
Genentech (DNA) recovered slightly from Tuesday's selloff after a jury in Los Angeles County Superior Court ruled that DNA owes the City of Hope National Medical Center compensatory damages of $300.2 million in royalties. DNA, which fell $2.85 to $31.55 on 4.7