Abbott Looks To Solvay To Help Solve Its Humira Dependence
28 Septiembre 2009 - 12:01PM
Noticias Dow Jones
When Abbott Laboratories' (ABT) top product, the arthritis drug
Humira, dropped in status from from wildly successful to pretty
successful, the logic of Wall Street dictated that something had to
be done about it.
Now, the question is whether Abbott has done enough to fully
address its Humira "problem" with Monday's agreement to acquire the
pharmaceutical unit of Solvay SA (SVYSY) for about $6.6 billion
cash.
On one hand, the deal should boost Abbott's earnings and allow
the company to expand in emerging markets, while gaining new
products that help reduce its dependence on Humira. But at the same
time, the Solvay products and research pipeline leave some Abbott
investors unimpressed, and Abbott is doubling down on a cholesterol
franchise that has clouds hanging over it.
Humira generates about one-sixth of total company revenue but
its sales growth has slowed to about 20% this year from nearly 50%
last year. The deceleration - fueled by currency fluctuations and
high copays for some patients - contributed to a 9% decline in
Abbott shares year-to-date through Friday, lagging behind most
other big drug makers. A relatively thin late-stage research
pipeline also has factored into investor discomfort.
Abbott Chief Executive Miles White - who has been hesitant to
publicly acknowledge that the Humira slowdown was much of a problem
in the first place - hopes the Solvay deal helps put to rest
concerns about the sustainability of Abbott's profit growth.
The Solvay purchase may not definitively address Abbott's heavy
reliance on Humira, but it will add to Abbott's earnings, and White
indicated Abbott would continue to search for additional deals.
So far on Monday, the market seems happier with Abbott - the
stock is up 3.3% at $48.91.
Abbott will pick up more than $3 billion in annualized sales
with the Solvay buy, including gastroenterology and hormone-based
drugs; in comparison, Abbott had $29.5 billion in sales last year,
$4.5 billion of which was from Humira. Also, Abbott will inherit a
research pipeline that includes potential treatments for
Parkinson's disease - partially addressing what some investors view
as Abbott's relatively weak late-stage pipeline.
A question mark is Abbott's doubling down on the fenofibrate
drugs Tricor and Trilipix, for treatment of cholesterol-related
abnormalities and which Abbott has co-marketed with Solvay. Abbott
will gain full marketing control and buy out the royalty rights
from Solvay. But Tricor could become exposed to generic competition
in the next couple of years, and both drugs could face pressure in
coming months if a U.S.-sponsored patient trial raises concerns
about their effectiveness, as some doctors and analysts expect.
White said Abbott wasn't particularly interested in broadening
its presence in the fenofibrate market at first, but "as time went
on we got a fairly good feel for what our future looks like here.
Given that, it became easier for us to put it in the deal, which
made it easier for Solvay to do the deal."
Analysts had mixed reactions. Bernstein's Derrick Sung said the
deal will boost Abbott's bottom line and help it expand into
emerging markets. Many pharmaceutical companies have emphasized the
need to diversify into emerging markets over the past year, as
pressures have mounted on the U.S. prescription-drug market that
drove hefty profit growth for many years.
But Credit Suisse's Catherine Arnold, while acknowledging the
profit boost, would have preferred to see Abbott pursue "more
strategic assets that would add better long-term growth." She said
the pressures on the fenofibrate franchise will offset some of the
benefits of the deal, and that Humira is still expected to
contribute more than one-third of Abbott's sales growth over the
next three years.
Abbott isn't finished with deals. White noted the company would
inherit $500 million in research-and-development capacity that
would give Abbott flexibility to pursue licensing or "external
partnering" agreements, and that "we hope to share more news on
this front in the coming months."
-Peter Loftus; Dow Jones Newswires; 215-656-8289;
peter.loftus@dowjones.com