Abbott Labs' (
ABT
) split into two separately trading companies: one, Abbott Labs,
with diversified medical products, and the other, AbbVie, with
research-based proprietary pharmaceuticals, will be effective from
today on Jan 2 and AbbVie will begin trading today. Our
$67 price estimate for Abbott Labs
is for consolidated entity, and our current analysis does not
reflect the split. We will soon update our model on availability of
2012 10-k form and pro-forma financials. Meanwhile, we
provide the detailed structure and prospects of the companies
following the spin-off.
See our complete analysis for Abbott Labs
here
Abbott Labs: A Well Diversified Play
Post spin-off, Abbott Labs has a diverse portfolio of healthcare
products including:
-
Pharmaceuticals
- Generic drugs
- Nutritionals - Products such as infant formulas, snack bars
and meal replacement shakes
- Vascular - Minimally invasive medical devices for heart
diseases, strokes, carotid artery diseases, and other serious
vascular conditions
- Diagnostics - Systems and tests used for screening for drugs
of abuse, cancer, therapeutic drug monitoring, fertility,
physiological diseases and infectious diseases such as hepatitis
and HIV
While this business is left with products having relatively
lower margins, we expect growth to be fairly stable in the long
term. These businesses has a significant presence in rapidly
growing markets like India, China and Russia and should provide a
substantial growth opportunity.
In the pharmaceutical business, the company committed to several
purchases in the past like Solvay and Piramal to diversify its
portfolio and expand into emerging markets. On a similar note, the
company recently opened a nutritional R&D center in India and
struck an R&D deal with a Russian group to boost its
nutritional business. In the vascular business, the company is
developing a next-generation Drug Eluting Stent (
DES
), XIENCE Xpedition, which is expected to launch in Europe this
year and in the U.S. in 2013. Further, the
company's XIENCE PRIME received approval in Japan earlier
this year.
AbbVie: Dependence On Humira Could Hurt
AbbVie has the higher-margin proprietary pharmaceuticals and
biologics, including primary care and specialty care drugs that
prevent and treat conditions such as autoimmune diseases, lipid
disorders, kidney diseases, prostate cancer, thyroid diseases and
HIV. The company's prized asset, the blockbuster drug Humira, is
part of AbbVie and will drive future revenues for the company.
However, even greater dependence on Humira is a concern. Humira
will lose patent protection in late 2016 in the U.S. and mid-2017
in Europe. The company's current pipeline doesn't have a lot of
very strong potential blockbuster drugs, which could limit its
growth potential in the long term. Recently its partner Reata
Pharmaceuticals discontinued a late-stage trial of their potential
blockbuster drug for chronic kidney disease and diabetes due to
safety concerns raised by an independent safety committee.
Another worry is the growing competition for Humira (Read Pfizer
Receives Major Boost As FDA Approves RA Drug Tofacitinib). Further,
Tricor went off-patent in July 2012 while other drugs such as
Niaspan and Kaletra are seeing a decline in sales due to
significant competition.
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