J.P. Morgan Lowers Abbott Labs to Underweight

Analyst Michael Weinstein thinks the drugmaker's top seller, Biaxin, will be hurt by generic competition

J.P. Morgan downgraded Abbott Laboratories (ABT ) to underweight from neutral.

On Thursday the drugmaker posted 52 cents first-quarter GAAP earnings per share. Analyst Michael Weinstein says he's convinced that Abbott's $539 million U.S. franchise for antibiotics line Biaxin will succumb to generic competition from Teva starting in May, 2005. Abbott's patent is due to expire next year. He notes this includes Biaxin and Biaxin XL, which isn't factored into the Street's forecast. The Street assumes a smooth transition from Biaxin to XL formulation, with no drop-off in profits.

Weinstein says this brings seven drugs that Abbott has "at risk" in 2005-06. He notes the combined impact from these seven drugs is quite meaningful, resulting in likely down years for pharmaceutical profits in 2005 and 2006. Weinstein cut the $2.68 2005 earnings per share estimate to $2.60, and trimmed the $2.85 2006 estimate to $2.66.

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