Abbott Posts Surprise Net Loss as Value of Mylan Stake Tanks

  • Stake of 13% in Mylan comes from sale of Europe generics unit
  • Adjusted EPS beats estimates; Abbott also narrows FY forecast

Abbott Laboratories posted a surprise third-quarter net loss after the value of its stake in EpiPen maker Mylan NV slumped as the stock dropped in recent months.

Abbott became Mylan’s biggest shareholder last year after selling its generic drugs unit in Europe and developed markets to the drugmaker, and still holds a 13 percent stake. As Mylan became embroiled in public outrage over the rising price of its EpiPens, the stock slumped 10 percent in September alone, causing a $947 million writedown in Abbott’s third quarter.

Abbott’s shares declined 1.5 percent to $40.54 at 9:49 a.m. in New York on Wednesday.

The medical-device maker has also been grappling with problems that cropped up at two companies -- Alere Inc. and St. Jude Medical Inc. -- that it has agreed to acquire.

St. Jude, which has been the target of short-seller Carson Block’s Muddy Waters LLC, posted third-quarter earnings that missed analysts’ estimates earlier on Wednesday. Meanwhile Muddy Waters made new allegations, saying St. Jude’s pacemakers and defibrillators can be easily hacked. Abbott Chief Executive Officer Miles White defended St. Jude, saying on a conference call with analysts that the company has responded appropriately to the short seller’s allegations.

“St. Jude is going to close,” Miles said.

The situation is different with Alere -- a deal Abbott has tried to terminate. The completion “remains to be seen,” the CEO said.

Excluding the Mylan writedown, Abbott’s earnings of 59 cents a share beat analysts’ predictions of 58 cents, on average, helped by rising demand for its generic drugs and medical devices. The company also said in a statement that it narrowed its profit forecast for the year to $2.19 to $2.21 per share -- in line with the $2.20 anticipated by analysts.

At the end of January, the Abbott Park, Illinois-based company agreed to buy Alere, a maker of medical tests and supplies. The $5.8 billion deal has since turned sour after Alere disclosed probes in its sales practices overseas, with the companies trading accusations and Abbott saying it wants to end the transaction, while Alere wants it to go through. Alere’s shareholders are slated to vote on the acquisition on Friday. 

CEO White, on the conference call, said Abbott is still working to get regulatory approvals.

Two months after the Alere agreement, in April, Abbott announced a $25 billion deal to acquire St. Jude. In August, Muddy Waters research firm issued a report saying St. Jude’s heart-rhythm devices may be uniquely vulnerable to cybersecurity attacks. St. Jude, which has denied the allegations, separately warned patients this month about an unrelated risk of accelerated depletion of its defibrillator batteries, which has led to two deaths.

On Wednesday, Muddy Waters posted a video designed to show that St. Jude’s Merlin equipment can be reverse-engineered, allowing the programmer commands to be manipulated so that a patient may get an unnecessary cardiac shock or the device may be turned off. St. Jude said it stands behind the security and safety of its devices and criticized Muddy Waters for “the irresponsible release of information that is intended for financial gain.” Earlier this week, St. Jude announced the creation of a cybersecurity medical advisory board and said it will continue to work with researchers to understand cyber risks and potential vulnerabilities with its devices.

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