Abbott Labs Cuts 1,900 Jobs After Health Overhaul Prompts Restructuring
Abbott Laboratories, maker of the rheumatoid arthritis drug Humira, said it will cut about 1,900 jobs as part of a restructuring of its pharmaceutical business.
The cuts, amounting to 2 percent of the workforce, will help the Abbott Park, Illinois-based company cope with the U.S. health-care law passed last year, Abbott said in a statement today. The drugmaker said it would take charges of about $295 million in the coming years to transfer product manufacturing to new locations, including about $165 million this year.
The reductions would come on top of 3,000 job cuts the company announced in September after its purchase of Solvay Pharmaceuticals last year, Abbott spokeswoman Melissa Brotz said in a telephone interview. Abbott shares fell 11 percent in the year before today, as European governments tried to rein in health spending to reduce budget deficits and the U.S. law raised taxes on drugmakers.
“Every single large company in my universe is looking for ways to get leaner at a time when there are growth pressures, pricing pressure, margin pressure,” said Rick Wise, an analyst with Leerink Swann & Co. in New York. “Unfortunately, these kinds of moves are going to be ongoing.”
The shares fell $1.21, or 2.5 percent, to $46.75 at 4 p.m. in New York Stock Exchange composite trading.
Chief Executive Officer Miles White today said that sales rose 13 percent in the fourth quarter of 2010 “despite a very challenging environment.” Abbott is struggling with the slow recovery of the global economy as well as regulatory changes, White said on a conference call today.
“Frankly, it’s more difficult to get products approved,” White said. “This is the environment we’re operating in and so we have to continue to respond in ways that protect our shareholders and strengthen the long-term sustainability of our business.”
The job cuts come “in response to changes in the health- care industry, including U.S. health-care reform and the challenging regulatory environment,” Abbott said in the statement. The move will “streamline commercial and manufacturing operations, improve efficiencies and reduce costs.”
Abbott projected adjusted earnings of $4.54 to $4.64 a share this year, up from $4.17 a share in 2010. That compares with the average forecast of $4.63 of 21 analysts surveyed by Bloomberg.
The health law cost Abbott $200 million last year in increased rebates to Medicaid, the U.S.-backed health plan for the poor, said Adelle Infante, an Abbott spokeswoman, in an e- mail. That will continue in 2011 and the company expects to pay an additional $200 million for the drugmaker-tax and discounts the law requires for patients on Medicare, the government plan for the elderly, Chief Financial Officer Thomas Freyman said during the conference call.
Abbott expects European austerity measures to cost the company $250 million this year, he said.
The company also makes the world’s best-selling heart stent, Xience. The device is used to prop open arteries after surgery to remove fatty deposits that can cause clots and strokes.
To contact the editor responsible for this story: Reg Gale at Rgale5@bloomberg.net
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