Abbott Laboratories said on Wednesday it was
pushing ahead to complete its planned purchases of medical
device maker St. Jude Medical Inc and diagnostics company Alere
Inc despite lingering questions about product safety and
Abbott Chief Executive Officer Miles White on a conference
call with analysts said he hoped to acquire St. Jude by the end
of the year and praised the smaller company's handling of claims
by short-seller Muddy Waters that its implantable heart devices
posed cyber security risks.
Although White said Abbott was pursuing all necessary
regulatory approvals to acquire Alere, he did not go so far as
to predict the deal would be approved. "We'll work through
regulatory approvals and see what happens," White said on the
Shares of Abbott fell 2.7 percent to $40.04 while
Alere rose 2.3 percent to $43.36 and St. Jude
dipped 0.6 percent to $79, all on the New York Stock Exchange.
Stifel Nicolaus analyst Rick Wise attributed Abbott's
decline to lingering uncertainty about the St. Jude and Alere
deals, and worries about declining overseas sales of Abbott's
"There's a lot of concern and noise," he said. "Any hint of
anything is making people anxious."
Abbott agreed in February to buy Alere for $5.8 billion, to
acquire its diagnostic tests performed at home and in doctors'
offices and hospitals.
Just two months later it agreed to pay $25 billion for St.
Jude, a leading maker of heart devices. The combined price of
the two deals amounted to half of Abbott's market valuation.
The relationship between Abbott and Alere cooled after the
target company failed to file financial statements and disclosed
probes into billing and foreign sales practices.
Moreover, in July, at the request of the Food and Drug
Administration, Alere recalled its INRatio device used to
monitor levels of the widely used blood thinner warfarin because
it was found to generate faulty results.
In August, Alere filed a lawsuit accusing Abbott of dragging
its feet on key antitrust submissions to sabotage the deal.
Separately on Wednesday, Abbott reported a quarterly profit
that edged past estimates as strength in its medical devices
business more than offset a decline in its nutrition unit.
Excluding items, Abbott earned 59 cents per share on sales
of $5.30 billion in the third quarter.
Analysts, on average, expected earnings of 58 cents per
share on revenue of $5.29 billion, according to Thomson Reuters
Global sales of nutritional products, including baby formula
Similac and Ensure for adults, fell 2 percent to $1.76 billion.
Sales of the products outside the United States dropped 9.4
percent, largely due to declines in China, which is requiring
manufacturers to reregister their baby formulas with the
government to greater ensure their safety.
"The situation in China is leading to a lot of unusually
high (price) discounting," Stifel Nicolaus' Wise said.
In the longer term, however, he said Abbott could benefit as
many rival makers of infant formula vanish from the Chinese
market due to stricter regulations.
Also on Wednesday St. Jude reported its quarterly adjusted
profit was 99 cents, missing the average estimate by 2 cents.
St. Jude is facing multiple problems, including an
investigation by the FDA over claims its heart devices have
defects that make them vulnerable to fatal cyber hacks.
The company has sued short-seller Muddy Waters and cyber
research firm MedSec Holdings after they claimed flaws in the
cyber security of Abbott's devices.
St. Jude CEO Michael Rousseau said on a conference call on
Wednesday he expected Muddy Waters to continue to "mislead"
investors and patients about the cyber safety of its devices.
Muddy Waters released several videos on Wednesday morning
that claimed to be demonstrations of how attacks could be
launched on St. Jude's implanted heart devices.
Reuters was unable to independently confirm claims in the
videos, which were posted on a new website set up by Muddy
A St. Jude spokeswoman said the company had not verified the
claims in the videos.
In an unrelated matter last week, St. Jude said it will
recall some of its 400,000 implanted heart devices due to the
risk of premature battery depletion, a condition linked to two
deaths in Europe.
St. Jude and Abbott on Tuesday announced a $1.12 billion
deal to sell some of their devices to Japan-based Terumo Corp
, an important step toward completing their tie-up.
(Additional reporting by Jim Finkle in Boston and Bill Berkrot
in New York)