8-KRegulation FD

ABBOTT LABORATORIES 8-K Report, Regulation FD Disclosure (Aug 1, 2005)

Filed August 1, 2005For Securities:ABT

Summary

This 8-K filing from Abbott Laboratories (ABT) on August 1, 2005, primarily announces an amendment to their distribution and co-promotion agreement with Boehringer Ingelheim Pharmaceuticals Inc. Effective January 1, 2006, Abbott will cease to be the distributor for three Boehringer Ingelheim products: Mobic®, Flomax®, and Micardis®. While Abbott will no longer record the gross sales of these products, they will continue to earn a commission based on Boehringer Ingelheim's sales in the U.S. Importantly, the amendment ensures that Abbott's pretax income from these products will remain consistent with prior expectations through 2008. A significant financial implication for investors is that Abbott's gross margin ratio is expected to increase by approximately 500 basis points starting in 2006 due to the shift away from recording lower-margin distribution sales.

Key Highlights

  • 1Abbott Laboratories amended its distribution and co-promotion agreement with Boehringer Ingelheim Pharmaceuticals Inc.
  • 2Effective January 1, 2006, Abbott will cease distributing Mobic®, Flomax®, and Micardis®.
  • 3Abbott will continue to earn commissions based on Boehringer Ingelheim's U.S. sales of these products.
  • 4Abbott's pretax income from these products is expected to be consistent with prior projections through 2008.
  • 5The company anticipates a gross margin ratio improvement of approximately 500 basis points beginning in 2006.
  • 6Sales of these three Boehringer Ingelheim products will no longer be included in Abbott's reported Net Sales from 2006 onwards.

Frequently Asked Questions

The primary change is that Abbott will stop acting as the distributor for Mobic®, Flomax®, and Micardis® starting January 1, 2006. While Abbott will no longer report the gross sales of these products, it will continue to earn a commission based on Boehringer Ingelheim's sales.

Starting in 2006, the sales of Mobic®, Flomax®, and Micardis® will no longer be included in Abbott's reported Net Sales. However, the company will still recognize income through commissions.

Abbott expects its pretax income from these products to remain stable and consistent with previous expectations through 2008. Furthermore, the company anticipates a significant positive impact on its gross margin ratio, with an expected increase of approximately 500 basis points from 2006 onwards, as lower-margin distribution sales are removed from its reporting.

Abbott's co-promotion for Micardis® is set to continue through the end of March 2006. The distribution activities for all three products (Mobic®, Flomax®, and Micardis®) will cease at the end of 2005.