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J.P. MORGAN HEALTHCARE CONFERENCE 2017


By Omar Ford

Staff Writer

SAN FRANCISCO – Abbott Laboratories came off a blockbuster year in 2016 filled with acquisitions, divestitures and lawsuits. Executives of the company took to the podium during the 35th annual J.P. Morgan Healthcare conference to give a look back to last year and to provide a prelude of what lies ahead in 2017.

Abbott emphasized how the recently completed $25 billion acquisition of St. Paul, Minn.-based St. Jude Medical Inc. was a turning point for the company. (See Medical Device Daily, Jan. 5, 2017.)

"With the acquisition of St. Jude, Abbott will now compete in nearly every area of the $30 billion cardiovascular device market and hold number one or number two positions across several large and high-growth markets," said Brian Yoor, Abbott's senior vice president and CFO. "Abbott now becomes the clear global leader in the rapidly growing area of the left ventricle assist devices with heart rate along with other important new heart failure products," Yoor said.

The company's goal over the next year will be to push St. Jude's growth to the mid-single digits. Larry Biegelsen, an analyst with Wells Fargo, said two key FDA approvals could go toward helping Abbott accomplish this goal.

"Abbott believes that FDA approval of St. Jude's MRI-safe pacemaker is imminent, while the MRI-safe ICD (implantable cardioverter defibrillator) is on track for mid-year approval," Biegelsen said. "We expect the launch of these new devices to strengthen Abbott's competitive position in the cardiac rhythm management market."

But the company's pacemaker approval aspirations suffered somewhat. Earlier this week, it was reported the Australia's Therapeutic Goods Association issued a warning and halted the Nanostim Leadless II IDE/CAP clinical study due to battery malfunctions. Abbott said that 0.5 percent of the implanted Nanostim Leadless cardiac pacemakers have experienced battery malfunction. The study is being conducted at 56 centers in the U.S., Canada and Australia.

NO SMALL FEAT

The acquisition wasn't a layup for either Abbott or St. Jude. Both companies have run into a rash of issues since the acquisition was announced. (See Medical Device Daily, April 29, 2016.)

Abbott spent the better part of 2016 trying to close the St. Jude deal but ran into a few stumbling blocks along the way. Notably, the Abbott Ill.-based company had to settle concerns from the Federal Trade Commission, who said the combined company would control a significant percentage of the vascular closure device market. The deal was green lit after the FTC accepted a proposal from the divestiture of St. Jude's vascular closure device business and Abbott's steerable sheath business to Tokyo-based Terumo Corp. (See Medical Device Daily, Dec. 30, 2016.)

St. Jude Medical has been embroiled in controversy of its own since the merger proposal was made public. In August short-seller Muddy Waters and research firm Medsec Holdings said that St. Jude's heart devices were susceptible to cyber-attacks. St. Jude denied the allegations. However, earlier this week, Abbott released cyber security updates for its St. Jude heart devices from a recommendation of The Department of Homeland Security's Industrial Control Systems Cyber Emergency Response Team.

The updates addressed hacking vulnerabilities in the firm's Merlin.net system. The measure came several months after the U.S. government launched a probe into claims the devices were vulnerable to potentially life-threatening hacks. These hacks could cause implanted devices to pace at potentially dangerous rates or cause them to fail by draining their batteries. Federal agencies said that to date there weren't any actual reports of hacking.

ELEPHANT IN THE ROOM

One of the biggest lingering issues from 2016 is Abbott's $5.8 billion bid to acquire diagnostics-maker Alere Inc. Abbott executives provided little comment or insight on the troubled deal when questioned about it at the J.P. Morgan Healthcare Conference.

In December, Abbott cited a series of what it called "damaging business developments"that the Waltham, Mass.-based company has suffered since the agreement was signed in late January.

Alere lost its billing privileges for a substantial division, has suffered a permanent recall of an important product platform, has been through multiple government subpoenas – including two criminal subpoenas – delayed filing its annual 10k report by five months, and admitted to internal control failures requiring restatement of its 2013 to 2015 financials. (See Medical Device Daily, Dec. 8, 2016.)

Despite these problems, analysts said that there should not be any issues that impact the company's upcoming guidance forecast.

"We believe that Abbott's 2016 outlook remains intact and the stand-alone underlying business will grow earnings per share about 10 percent in 2017," Biegelsen said. "Management has done a good job of outlining the key headwinds and tailwinds in 2017, and there should be no major surprises in the guidance."



Published  January 12, 2017

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