07.22.14
$10.01 Billion (21.8 B total)
KEY EXECUTIVES:
Miles D. White, Chairman & CEO
Thomas C. Freyman, Exec. VP, Finance & Chief Financial Officer
Brian J. Blaser, Exec. VP, Diagnostics Products
John M. Capek, Ph.D., Exec VP, Medical Devices
Charles D. Foltz, Sr. VP, Abbott Vascular
Heather L. Mason, Sr. VP, Diabetes Care
Murthy V. Simhambhatla, Sr. VP, Abbott Medical Optics
Sharon J. Bracken, VP, Point of Care Diagnostics
Michael J. Buck, VP, Vascular, Global Market Development
John D. Coulter, VP, Molecular Diagnostics
Robert B. Ford, VP, Diabetes Care, Commercial Operations
Catherine Mazzacco, VP, Abbott Medical Optics, Commercial
NO. OF EMPLOYEES: 32,500
GLOBAL HEADQUARTERS: Abbott Park, Ill.
“Failure isn’t fatal, but failing to change might be.”
— John Wooden, former UCLA basketball coach
Reinvention has long been a powerful business strategy. In 1889, young entrepreneur Fusajiro Yamauchi opened a small shop called Nintendo Koppai to sell traditional Japanese playing cards (hanafuda) crafted from mulberry tree bark. It was a bold gamble at the time: Card-playing had recently been legalized after a 256-year ban, and Yamauchi’s compatriots had not yet warmed up to the game.
Nevertheless, Yamauchi’s hand-made cards soon caught on, prompting him to open a second shop in Osaka and create additional games. He retired at age 70 in 1929, leaving his business in the hands of his descendants.
At which point, it was reborn.
During the 1950s, Yamauchi’s grandson Hiroshi visited the United States and secured the rights to print Disney characters on the company’s playing cards. A decade later, he delved into other areas, creating a taxi company, a hotel chain, an instant rice company and a television network. None of those ideas panned out.
But Hiroshi was not easily discouraged. And eventually he hit paydirt.
In the 1970s, Hiroshi began dabbling in electronic family entertainment and hired a young student named Shigeru Miyamoto to help him develop new gaming products. Miyamoto’s ideas—Super Mario Bros., Donkey Kong, and the Legend of Zelda—made Hiroshi a multi-millionaire and his company (Nintendo) one of the most successful in Japan.
“From handmade nineteenth-century playing cards to the twenty-first century Wii may seem like a leap of light years, and it is, in terms of the outer form of the products,” technology forecaster/business strategist Daniel Burrus (founder/CEO of Burrus Research) and author/entrepreneur John David Mann wrote in a paper titled “The Reinvention Imperative.” “But the genius of Nintendo’s success is that Yamauchi and Shigeru found a way to completely reinvent the company yet remain unerringly true to its core: Nintendo = games based on memorable characters.”
Countless numbers of companies have followed in Nintendo’s footsteps and reinvented themselves to stay relevant in the market: Chrysler, led by iconic entrepreneur Lee Iacocca, gained popularity with drivers by reinventing the family station wagon in 1983; likewise, Walmart founder Sam Walton gave the old-fashioned General Store concept a much-needed makeover; Xerox escaped the photocopy typecast by inventing the Ethernet and branching out into mass-transit ticketing systems and e-discovery solutions; and Apple owes its longevity to its reinvention of the cell phone and portable music player.
Abbott Laboratories has stayed relevant through reinvention as well. Ten years ago, the multinational firm reincarnated itself as a formidable pharmaceutical and medical device developer through the spinoff of its slow-growing hospital business (happy birthday, Hospira). Last year, the company remade itself again, this time splitting itself into two publicly traded entities—one in diversified medical products and the other in research-based pharmaceuticals.
The new firm, AbbVie Inc., oversees all big-name drugs, including Tricor, Niaspan and Humira, the blockbuster anti-inflammatory drug whose patent expires in the United States in late 2016 and in Europe the following year. It is being led by longtime Abbott executive Richard Gonzalez and employs about 21,000 people.
The legacy Abbott company, meanwhile, retains the name, its chairman/CEO (Miles D. White) and a diverse offering of healthcare products, ranging from coronary stents and sophisticated laboratory testing equipment to infant formula.
“In a shifting environment, consistent business performance is not enough to perpetuate itself. To keep their organizations relevant, CEOs and other leaders must heed the reinvention imperative,” White wrote in a November 2013 article for the Harvard Business Review. “That has happened at such long-term leaders as IBM, Xerox and Samsung. Just 10 years ago Samsung was known only for consumer electronics; today it spans advanced technology, construction, petrochemicals, fashion, medicine, finance, and hotels. This kind of reinvention has been our goal at Abbott. Fifteen years ago we recognized a need to change; since then adaptation has been at the heart of our strategy. As a result, our revenue has more than tripled, and we have delivered industry-leading earnings growth and shareholder returns.”
Such growth continued last year as net earnings from continuing operations more than quadrupled, going from $2.38 billion or $1.50 per share, from $579 million or 36 cents per share in 2012. The company also grew operating earnings 38.8 percent to $2.6 billion, and increased its operating margin by 320 basis points compared with 2012, according to data from Abbott’s 2013 annual report.
Ongoing earnings also were up, expanding 15 percent in 2013 to $3.2 billion or $2.01 per share (excluding specified items), compared with $2.77 billion or $1.74 per share in 2012. The earnings met analysts’ expectations for the year ended Dec. 31, 2013.
Emerging market sales jumped 11 percent, mainly driven by solid growth in Abbott’s Diagnostics, Medical Devices and Nutritionals businesses. The company garnered particularly impressive returns in China, Switzerland (an obvious anomaly) and Russia last year—sales ballooned 26 percent, 14.2 percent and 8.2 percent, respectively—but those gains predictably were offset by staggering losses in developed markets. Proceeds in Japan, for example, fell 16.3 percent to $1.4 billion, while The Netherlands’ revenue was down 13.2 percent at $960 million. Earnings also slipped 2.5 percent in Canada and 3.6 percent in the United Kingdom.
Compounding those losses was a whopping 56.8 percent drop in reported net earnings ($2.6 billion or $1.62 per share, down from $5.96 billion, or $3.72 per share in 2012) as well as foreign exchange rate volatility. Abbott also was blindsided by a third-quarter supplier recall that negatively impacted international nutrition sales by two percentage points.
In early August, Abbott Nutrition Vietnam recalled batches of Similac Gain Plus Eye–Q for infants aged 1-3 over suspicions the formula contained a germ that causes muscle paralysis. The company recalled 10,135 out of 12,927 boxes of the canned Similac on the Vietnamese market.
Despite the setbacks, Abbott managed to boost its total revenues 1.6 percent to $21.8 billion and its Medical Device sales 2.1 percent to $10 billion. White linked the sales gains to the company’s operating margin expansion and “selective cost management.”
“For the full-year 2013, we delivered solid growth...” White said in his annual letter to investors. “We returned nearly $2.5 billion to shareholders in the form of dividends and share repurchases, and announced a 57 percent increase in our dividend beginning this year [2014]. Strong performances across many of our businesses, combined with gross and operating margin expansion, enabled us to deliver on our 2013 expectations despite some challenges.”
Operating margins were best in the company’s Diagnostics and Nutritional businesses, its top-performing units in 2013.
Diagnostics bolstered its operating margin by 300 basis points and increased revenues 5.9 percent (8.3 percent excluding foreign exchange rates) to $4.5 billion. Executives attributed the growth to the multinational launch of automated in-vitro diagnostic assays for Flu A/B/RSV, C.difficle, and VanR as well as the U.S. Food and Drug Administration (FDA) approval of the Abbott RealTime HCV Genotype II, a test that identifies the genotype of hepatitis C virus (HCV) that a patient carries. The RealTime HCV test can differentiate genotypes 1, 1a, 1b, 2, 3, 4, and 5, using a sample of an infected patient’s blood plasma or serum, according to the company. FDA officials okayed the RealTime HCV Genotype II only for people who are chronically infected with HCV.
Abbott’s Nutritional business also expanded its operating margin by nearly 300 basis points, but could not match the Diagnostics unit performance. Nutritional product sales swelled 4.3 percent (5.4 percent excluding foreign currency exchange rates) to $6.7 billion as the company’s offerings gained favor with aging populations, patients with chronic diseases and newfound middle-class consumers in emerging markets. Manufacturing/distribution process changes also contributed to the rise in Nutritional operating margins from 13.2 percent in 2011 to 18.7 percent in 2013.
Abbott made two important acquisitions to augment its offerings in the Vascular and Medical Optics segments and improve their overall performance. In the Vascular segment it acquired Webster, Texas-based stent manufacturing firm IDEV Technologies Inc. for $310 million net of cash and debt. IDEV’s flagship stent, Supera Veritas, already sells in Europe for treating blockages in blood vessels due to peripheral artery disease, a sickness that ails 27 million people in Europe and North America. It also is under FDA review for superficial femoral artery treatment in the United States.
The purchase, though, failed to jump-start Vascular unit sales. Revenues fell 1.9 percent to $3 billion despite continued share gains of the Xience Xpedition drug-eluting stent (achieved mostly through the Japanese debut of the Xience Prime small vessel stent) and Absorb (Abbott’s drug-eluting coronary bioresorbable vascular scaffold); higher sales of the MitraClip, a device to treat mitral regurgitation; and a 5.1 percent surge in endovascular sales.
In the Medical Optics business, Abbott acquired OptiMedica Corporation for about $250 million net of cash. OptiMedica’s flagship product, Catalys, allows surgeons to replace manual steps in cataract surgery with computer-guided laser technology, and gives Abbott an entry point in the expansive and fast-growing laser cataract surgery market.
The investment paid off, too: Medical Optics sales climbed 4.1 percent last year to $1.1 billion, data from the annual report show. The segment’s other revenue drivers included the U.S., Chinese and Japanese approval of the Tecnis Toric monofocal intraocular (IOC) lens and the regulatory blessing of a preloaded version of the Tecnis 1-Piece multifocal IOC in Canada, India and the United States. A pre-loaded version of the Tecnis 1-Piece IOC was approved in Canada, Europe and Japan, and the iDesign advanced vision diagnostic and LASIK treatment planning system—okayed in Europe in 2012—was inducted in Canada and various Latin American and Asian markets in 2013.
The Tecnis Toric IOC combines the optical qualities of the Tecnis design with astigmatism correction. The Tenis Toric lens remains stable once inserted into the eye and minimizes imprecise light focusing (spherical aberration) to provide sharper distance vision for patients.
Diabetes care revenue slipped 1.5 percent to $1.3 billion in spite of several new product releases. In the third quarter, Abbott received CE Mark approval in Europe for the FreeStyle Precision Neo monitoring system, a new icon-driven system with visual glucose trend indicators and insulin logging. The system is designed to be used with FreeStyle Optium blood glucose and ketone test strips, which currently are available in Europe. In the second half of 2013, the company received both CE Mark and FDA approval for Precision Pro, a hospital glucose monitoring system that improves accuracy and dual-band wireless access to immediate test results.
“The FreeStyle Precision Pro system represents a significant step forward as we work to provide tools to improve the way hospitals manage patients’ glucose levels,” said Heather L. Mason, senior vice president of Diabetes Care at Abbott. “It makes the data available in real time, thanks to the meter’s new wireless capabilities. With its individually foil-wrapped test strips, the system is also designed to help reduce test strip cross-contamination in hospital environments.”
KEY EXECUTIVES:
Miles D. White, Chairman & CEO
Thomas C. Freyman, Exec. VP, Finance & Chief Financial Officer
Brian J. Blaser, Exec. VP, Diagnostics Products
John M. Capek, Ph.D., Exec VP, Medical Devices
Charles D. Foltz, Sr. VP, Abbott Vascular
Heather L. Mason, Sr. VP, Diabetes Care
Murthy V. Simhambhatla, Sr. VP, Abbott Medical Optics
Sharon J. Bracken, VP, Point of Care Diagnostics
Michael J. Buck, VP, Vascular, Global Market Development
John D. Coulter, VP, Molecular Diagnostics
Robert B. Ford, VP, Diabetes Care, Commercial Operations
Catherine Mazzacco, VP, Abbott Medical Optics, Commercial
NO. OF EMPLOYEES: 32,500
GLOBAL HEADQUARTERS: Abbott Park, Ill.
“Failure isn’t fatal, but failing to change might be.”
— John Wooden, former UCLA basketball coach
Reinvention has long been a powerful business strategy. In 1889, young entrepreneur Fusajiro Yamauchi opened a small shop called Nintendo Koppai to sell traditional Japanese playing cards (hanafuda) crafted from mulberry tree bark. It was a bold gamble at the time: Card-playing had recently been legalized after a 256-year ban, and Yamauchi’s compatriots had not yet warmed up to the game.
Nevertheless, Yamauchi’s hand-made cards soon caught on, prompting him to open a second shop in Osaka and create additional games. He retired at age 70 in 1929, leaving his business in the hands of his descendants.
At which point, it was reborn.
During the 1950s, Yamauchi’s grandson Hiroshi visited the United States and secured the rights to print Disney characters on the company’s playing cards. A decade later, he delved into other areas, creating a taxi company, a hotel chain, an instant rice company and a television network. None of those ideas panned out.
But Hiroshi was not easily discouraged. And eventually he hit paydirt.
In the 1970s, Hiroshi began dabbling in electronic family entertainment and hired a young student named Shigeru Miyamoto to help him develop new gaming products. Miyamoto’s ideas—Super Mario Bros., Donkey Kong, and the Legend of Zelda—made Hiroshi a multi-millionaire and his company (Nintendo) one of the most successful in Japan.
“From handmade nineteenth-century playing cards to the twenty-first century Wii may seem like a leap of light years, and it is, in terms of the outer form of the products,” technology forecaster/business strategist Daniel Burrus (founder/CEO of Burrus Research) and author/entrepreneur John David Mann wrote in a paper titled “The Reinvention Imperative.” “But the genius of Nintendo’s success is that Yamauchi and Shigeru found a way to completely reinvent the company yet remain unerringly true to its core: Nintendo = games based on memorable characters.”
Countless numbers of companies have followed in Nintendo’s footsteps and reinvented themselves to stay relevant in the market: Chrysler, led by iconic entrepreneur Lee Iacocca, gained popularity with drivers by reinventing the family station wagon in 1983; likewise, Walmart founder Sam Walton gave the old-fashioned General Store concept a much-needed makeover; Xerox escaped the photocopy typecast by inventing the Ethernet and branching out into mass-transit ticketing systems and e-discovery solutions; and Apple owes its longevity to its reinvention of the cell phone and portable music player.
Abbott Laboratories has stayed relevant through reinvention as well. Ten years ago, the multinational firm reincarnated itself as a formidable pharmaceutical and medical device developer through the spinoff of its slow-growing hospital business (happy birthday, Hospira). Last year, the company remade itself again, this time splitting itself into two publicly traded entities—one in diversified medical products and the other in research-based pharmaceuticals.
The new firm, AbbVie Inc., oversees all big-name drugs, including Tricor, Niaspan and Humira, the blockbuster anti-inflammatory drug whose patent expires in the United States in late 2016 and in Europe the following year. It is being led by longtime Abbott executive Richard Gonzalez and employs about 21,000 people.
The legacy Abbott company, meanwhile, retains the name, its chairman/CEO (Miles D. White) and a diverse offering of healthcare products, ranging from coronary stents and sophisticated laboratory testing equipment to infant formula.
“In a shifting environment, consistent business performance is not enough to perpetuate itself. To keep their organizations relevant, CEOs and other leaders must heed the reinvention imperative,” White wrote in a November 2013 article for the Harvard Business Review. “That has happened at such long-term leaders as IBM, Xerox and Samsung. Just 10 years ago Samsung was known only for consumer electronics; today it spans advanced technology, construction, petrochemicals, fashion, medicine, finance, and hotels. This kind of reinvention has been our goal at Abbott. Fifteen years ago we recognized a need to change; since then adaptation has been at the heart of our strategy. As a result, our revenue has more than tripled, and we have delivered industry-leading earnings growth and shareholder returns.”
Such growth continued last year as net earnings from continuing operations more than quadrupled, going from $2.38 billion or $1.50 per share, from $579 million or 36 cents per share in 2012. The company also grew operating earnings 38.8 percent to $2.6 billion, and increased its operating margin by 320 basis points compared with 2012, according to data from Abbott’s 2013 annual report.
Ongoing earnings also were up, expanding 15 percent in 2013 to $3.2 billion or $2.01 per share (excluding specified items), compared with $2.77 billion or $1.74 per share in 2012. The earnings met analysts’ expectations for the year ended Dec. 31, 2013.
Emerging market sales jumped 11 percent, mainly driven by solid growth in Abbott’s Diagnostics, Medical Devices and Nutritionals businesses. The company garnered particularly impressive returns in China, Switzerland (an obvious anomaly) and Russia last year—sales ballooned 26 percent, 14.2 percent and 8.2 percent, respectively—but those gains predictably were offset by staggering losses in developed markets. Proceeds in Japan, for example, fell 16.3 percent to $1.4 billion, while The Netherlands’ revenue was down 13.2 percent at $960 million. Earnings also slipped 2.5 percent in Canada and 3.6 percent in the United Kingdom.
Compounding those losses was a whopping 56.8 percent drop in reported net earnings ($2.6 billion or $1.62 per share, down from $5.96 billion, or $3.72 per share in 2012) as well as foreign exchange rate volatility. Abbott also was blindsided by a third-quarter supplier recall that negatively impacted international nutrition sales by two percentage points.
In early August, Abbott Nutrition Vietnam recalled batches of Similac Gain Plus Eye–Q for infants aged 1-3 over suspicions the formula contained a germ that causes muscle paralysis. The company recalled 10,135 out of 12,927 boxes of the canned Similac on the Vietnamese market.
Despite the setbacks, Abbott managed to boost its total revenues 1.6 percent to $21.8 billion and its Medical Device sales 2.1 percent to $10 billion. White linked the sales gains to the company’s operating margin expansion and “selective cost management.”
“For the full-year 2013, we delivered solid growth...” White said in his annual letter to investors. “We returned nearly $2.5 billion to shareholders in the form of dividends and share repurchases, and announced a 57 percent increase in our dividend beginning this year [2014]. Strong performances across many of our businesses, combined with gross and operating margin expansion, enabled us to deliver on our 2013 expectations despite some challenges.”
Operating margins were best in the company’s Diagnostics and Nutritional businesses, its top-performing units in 2013.
Diagnostics bolstered its operating margin by 300 basis points and increased revenues 5.9 percent (8.3 percent excluding foreign exchange rates) to $4.5 billion. Executives attributed the growth to the multinational launch of automated in-vitro diagnostic assays for Flu A/B/RSV, C.difficle, and VanR as well as the U.S. Food and Drug Administration (FDA) approval of the Abbott RealTime HCV Genotype II, a test that identifies the genotype of hepatitis C virus (HCV) that a patient carries. The RealTime HCV test can differentiate genotypes 1, 1a, 1b, 2, 3, 4, and 5, using a sample of an infected patient’s blood plasma or serum, according to the company. FDA officials okayed the RealTime HCV Genotype II only for people who are chronically infected with HCV.
Abbott’s Nutritional business also expanded its operating margin by nearly 300 basis points, but could not match the Diagnostics unit performance. Nutritional product sales swelled 4.3 percent (5.4 percent excluding foreign currency exchange rates) to $6.7 billion as the company’s offerings gained favor with aging populations, patients with chronic diseases and newfound middle-class consumers in emerging markets. Manufacturing/distribution process changes also contributed to the rise in Nutritional operating margins from 13.2 percent in 2011 to 18.7 percent in 2013.
Abbott made two important acquisitions to augment its offerings in the Vascular and Medical Optics segments and improve their overall performance. In the Vascular segment it acquired Webster, Texas-based stent manufacturing firm IDEV Technologies Inc. for $310 million net of cash and debt. IDEV’s flagship stent, Supera Veritas, already sells in Europe for treating blockages in blood vessels due to peripheral artery disease, a sickness that ails 27 million people in Europe and North America. It also is under FDA review for superficial femoral artery treatment in the United States.
The purchase, though, failed to jump-start Vascular unit sales. Revenues fell 1.9 percent to $3 billion despite continued share gains of the Xience Xpedition drug-eluting stent (achieved mostly through the Japanese debut of the Xience Prime small vessel stent) and Absorb (Abbott’s drug-eluting coronary bioresorbable vascular scaffold); higher sales of the MitraClip, a device to treat mitral regurgitation; and a 5.1 percent surge in endovascular sales.
In the Medical Optics business, Abbott acquired OptiMedica Corporation for about $250 million net of cash. OptiMedica’s flagship product, Catalys, allows surgeons to replace manual steps in cataract surgery with computer-guided laser technology, and gives Abbott an entry point in the expansive and fast-growing laser cataract surgery market.
The investment paid off, too: Medical Optics sales climbed 4.1 percent last year to $1.1 billion, data from the annual report show. The segment’s other revenue drivers included the U.S., Chinese and Japanese approval of the Tecnis Toric monofocal intraocular (IOC) lens and the regulatory blessing of a preloaded version of the Tecnis 1-Piece multifocal IOC in Canada, India and the United States. A pre-loaded version of the Tecnis 1-Piece IOC was approved in Canada, Europe and Japan, and the iDesign advanced vision diagnostic and LASIK treatment planning system—okayed in Europe in 2012—was inducted in Canada and various Latin American and Asian markets in 2013.
The Tecnis Toric IOC combines the optical qualities of the Tecnis design with astigmatism correction. The Tenis Toric lens remains stable once inserted into the eye and minimizes imprecise light focusing (spherical aberration) to provide sharper distance vision for patients.
Diabetes care revenue slipped 1.5 percent to $1.3 billion in spite of several new product releases. In the third quarter, Abbott received CE Mark approval in Europe for the FreeStyle Precision Neo monitoring system, a new icon-driven system with visual glucose trend indicators and insulin logging. The system is designed to be used with FreeStyle Optium blood glucose and ketone test strips, which currently are available in Europe. In the second half of 2013, the company received both CE Mark and FDA approval for Precision Pro, a hospital glucose monitoring system that improves accuracy and dual-band wireless access to immediate test results.
“The FreeStyle Precision Pro system represents a significant step forward as we work to provide tools to improve the way hospitals manage patients’ glucose levels,” said Heather L. Mason, senior vice president of Diabetes Care at Abbott. “It makes the data available in real time, thanks to the meter’s new wireless capabilities. With its individually foil-wrapped test strips, the system is also designed to help reduce test strip cross-contamination in hospital environments.”