Abbott Splits Into Two -- Medical Products and Pharma

Oct. 19, 2011
'The business models for medical products and pharmaceuticals are so different that this should be a boon for both,' says analyst.

Abbott announced on Oct. 19 that it plans to separate into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals.

"Abbott will be one of the largest and fastest-growing global diversified medical products companies, with a compelling portfolio of durable growth businesses in medical technology, branded generic pharmaceuticals and nutritionals," said Miles D. White, CEO Abbott."We will continue to grow our product lines, market share and global presence, especially in emerging mark

The diversified medical products company will consist of Abbott's existing diversified medical products portfolio, including its branded generic pharmaceutical, devices, diagnostic and nutritional businesses, and will retain the Abbott name. This company has $22 billion. This company will seek geographic expansion, particularly in high-growth emerging markets.

The research-based pharmaceutical company will include Abbott's current portfolio of proprietary pharmaceuticals and biologics and will be named later. This company has nearly $18 billion in annual revenue currently and includes brands such as Humira, Lupron, Synagis, Kaletra, Creon and Synthroid. In its pipeline are specialty therapeutic areas such as Hepatitis C, immunology, chronic kidney disease, women's health, oncology and neuroscience.

"The medical device industry seems to be undergoing a significant shift over the past two years, said Venkat Rajan, Medical Devices Industry Manager at Frost & Sullivan. "It would be difficult to identify a major tier one medical technology that has not had some sort of major change in leadership, merger/acquisition, or divestiture in the past 12 months.

"A common challenge for large healthcare conglomerates that develop both pharmaceutical and medical products is how they are able to draw attention to successful high growth practices that might be marginalized when looking at the company as a whole.

"When looking at its medical products, Abbott Vascular has the market leading drug eluting coronary stent, Xience, and a fairly strong future with CE mark approval earlier this year for Absorb, a first of its kind bioabsorbable coronary stent. Now investors looking at Abbott's medical products have a clearer picture of their market opportunity, as opposed to having to weigh the merits of their pharmaceuticals research business as well.

"Though they sell into similar care settings, target similar end-users, and address similar disease states, the business models for medical products and pharmaceuticals are so different that this should be a boon for both."

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