Abbott to Separate into Two Companies
The research-based pharmaceutical company will include Abbott's current portfolio of proprietary pharmaceuticals and biologics and will be named later. Both companies will be global leaders in their respective industries.
Oct 20 2011 --- Abbott has announced that it plans to separate into two publicly traded companies, one in diversified medical products and the other in research-based pharmaceuticals. 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. The research-based pharmaceutical company will include Abbott's current portfolio of proprietary pharmaceuticals and biologics and will be named later. Both companies will be global leaders in their respective industries.
"Today's news is a significant event for Abbott, and reflects another dynamic change in our company's 123-year history, strengthening our outlook for strong and sustainable growth and shareholder returns," said Miles D. White, chairman and chief executive officer, Abbott.
Abbott's proprietary pharmaceutical business has delivered market-leading performance with a sustainable mix of products and built a strong pipeline of proprietary medicines through internal discovery, in-licensing and collaboration efforts. Abbott also has leadership positions in its diversified businesses, including established pharmaceuticals, nutritionals, diagnostics, and vascular devices, where the company is now the global leader in interventional cardiology.
The research-based pharmaceutical company has nearly $18 billion in annual revenue today and will have a sustainable portfolio of market-leading brands, including Humira, Lupron, Synagis, Kaletra, Creon and Synthroid. An attractive pipeline of innovative R&D assets – in important specialty therapeutic areas such as Hepatitis C, immunology, chronic kidney disease, women's health, oncology and neuroscience – will help drive future growth.
The diversified medical products company has approximately $22 billion in annual revenue today and a durable mix of products balanced across four major businesses. It will continue to target double-digit ongoing earnings-per-share growth, with opportunities for geographic expansion, particularly in high-growth emerging markets. The company will have an extensive, broad-based pipeline of new products and technologies as well as opportunities for significant margin expansion.
Mr. White will remain chairman and CEO of Abbott, the diversified medical products company. Richard A. Gonzalez, currently executive vice president, Global Pharmaceuticals, will become chairman and CEO of the research-based pharmaceutical company. Mr. Gonzalez is a more than 30-year Abbott veteran and was previously president and chief operating officer of Abbott.
The two companies have evolved into distinct investment and business opportunities:
• The research-based pharmaceutical company will focus on select specialty products with breakthrough innovation that serve patient needs in some of the most critical medical areas, such as immunology, Multiple Sclerosis, chronic kidney disease, Hepatitis C, women's health and oncology. This company will continue to generate the majority of its revenue from developed markets. The company's sustainable portfolio and advancing pipeline, including established biologics expertise, have the potential to deliver accelerating revenue growth in the coming years.
• The diversified medical products company will be one of the largest and fastest growing investment opportunities in medical products with strong sales and ongoing earnings-per-share growth and a large, broad mix of products addressing many essential areas of health care. It will generate nearly 40 percent of its sales in high-growth emerging markets, with further expansion expected in the coming years.
"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 Mr. White. "We will continue to grow our product lines, market share and global presence, especially in emerging markets."
"The research-based pharmaceutical company will be a leader in its industry with a strong and sustainable portfolio of specialty medicines and a promising pipeline of future products," said Mr. Gonzalez. "This business has been delivering market-leading performance and is well positioned for future success."
The news came as Abbott reported strong ongoing third quarter results and confirmed a double-digit ongoing earnings growth outlook for 2011. Diluted earnings per share, excluding specified items, were $1.18, at the high end of Abbott's previous guidance range, reflecting 12.4 percent growth. Diluted earnings per share under Generally Accepted Accounting Principles (GAAP) were $0.19, net of specified items, including a $1.5 billion pre-tax reserve related to previously disclosed litigation. Worldwide sales increased 13.2 percent to $9.8 billion, including a favorable 5.3 percent effect of foreign exchange. Proprietary Pharmaceuticals sales increased 13.5 percent in the quarter. Durable Growth Business sales increased 15.3 percent, including double-digit growth in Nutritionals, Established Pharmaceuticals, Core Laboratory Diagnostics and Diabetes Care. Innovation-Driven Device Business sales increased 6.0 percent, including double-digit growth in Molecular Diagnostics.
Emerging markets sales were $2.6 billion, up 21.0 percent from the prior year and representing 26.1 percent of total sales, with strong growth across all of Abbott's operating divisions. The gross margin ratio was 60.4 percent in the third quarter, above Abbott's previous guidance, driven by favorable product mix. Abbott is confirming its guidance for double-digit ongoing earnings-per-share growth for 2011 and is narrowing its previous guidance range. Abbott's ongoing earnings-per-share guidance for full-year 2011 is $4.64 to $4.66, excluding specified items, reflecting 11.5 percent growth at the midpoint of the range.
"Strong performance across our businesses allowed Abbott to continue to deliver superior results," said Miles D. White, chairman and chief executive officer, Abbott. "We also experienced strong growth in emerging markets and success in our broad-based pipeline, including several new product approvals, regulatory submissions and clinical trial initiations."
