Abott Laboratories
Abott Laboratories
Abbott Laboratories
Datamonitor Healthcare Company Analysis: Big Pharma
Abbott Laboratories is a global broad-based healthcare company with commercial interests spanning pharmaceuticals, diagnostics, medical devices, ophthalmology, and nutritionals. In 2011, Abbott posted total revenues of $38.9bn, making it one of the leading healthcare product providers worldwide. Spurred by M&A, Abbott has successfully grown all of its businesses over the historical period of 200511. Focusing specifically on prescription pharmaceuticals, where a number of acquisitions have taken place, Abbott has gone on to record sizable sales growth. Rx sales have grown at an 8.4% compound annual growth rate (CAGR) between 2005 and 2011, rising substantially from $14.0bn to $22.7bn. Abbotts pharmaceutical sales outlook will be dramatically altered by imminent restructuring, which will see the separation of Abbotts research-driven pharma portfolio away from the rest of the business to become a standalone company, known as AbbVie. Historically, Abbotts pharma business has been driven by a combination of organic growth and incidental M&A events. Acquisitions of Kos (Niaspan [nicotinic acid]), Solvay (AndroGel [testosterone], Creon [pancrelipase]), and Piramal have all instantly lifted Abbotts pharma sales, while organic growth for a number of key product lines, such as Humira (adalimumab) and TriCor/Trilipix (fenofibrate), has boosted Abbotts pharma revenue stream more gradually. Moving forward, Humira will remain the companys principal growth driver, while patent expiries will see Niaspan, Kaletra (lopinavir + ritonavir), TriCor, and Zemplar (paricalcitol), among others, erode significant sales from Abbotts top line. Abbott is heavily reliant on Humira, which will itself face potential biosimilar erosion from 2016, to compensate for products at high risk from generic erosion over the forecast period. Since Abbott has limited pipeline expectations providing only modest sales of around $400m by 2017, the contribution from marketed products like Humira will be instrumental in dampening the impact of patent expiries. The imminent separation of its innovative pharma business, AbbVie, will create two rather distinct companies in terms of operating performance, with AbbVie likely to exhibit higher profit margins due to its core focus on the volatile, higher-margin pharmaceutical sector, while Abbott will assume a more stable business model in lower-margin sectors. Reference Code: HC00068-001 Publication Date: August 2012
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Data sourcing
Sales data
All Datamonitor company analysis is based on company-reported sales and financials data. For details around our forecasting methodology, please contact [email protected].
Analyst consensus
All prescription pharmaceutical forecasts have been made by Datamonitor. However, PharmaVitae also uses analyst consensus (from at least three individual brokers) to derive non-prescription pharmaceutical sales and operating cost ratio forecasts.
US Big Pharma Abbott Laboratories Amgen Inc. Bristol-Myers Squibb Co Eli Lilly & Co. Johnson & Johnson Merck & Co., Inc. Pfizer Inc.
Ex-US Big Pharma AstraZeneca plc Bayer AG Boehringer Ingelheim F. Hoffmann-La Roche Ltd GlaxoSmithKline plc Novartis AG Novo Nordisk A/S Sanofi
US Mid Pharma Allergan Inc. Baxter International Inc. Biogen Idec Inc. Celgene Corporation Forest Laboratories Inc. Gilead Sciences Inc.
Ex-US Mid Pharma Actelion Ltd. CSL Limited H. Lundbeck A/S Les Laboratoires Servier Menarini Merck KGaA Shire plc UCB S.A.
Japan Pharma Astellas Pharma Inc. Chugai Pharmaceutical Co., Ltd Daiichi Sankyo Co., Ltd Dainippon Sumitomo Ph. Co., Ltd Eisai Co., Ltd Mitsubishi Tanabe Pharma Corp. Otsuka Pharmaceutical Co., Ltd Shionogi & Co., Ltd Takeda Pharmaceuticals Co., Ltd
Big Pharma comprises companies with annual prescription pharmaceutical sales of more than $10bn that are not headquartered in Japan. Mid Pharma comprises companies with annual prescription pharmaceutical sales of less than $10bn that are not headquartered in Japan. Japan Pharma comprises companies headquartered in Japan.
Source: Datamonitor
DATAMONITOR
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DATAMONITOR
Analysis structure
Executive summary
The executive summary brings together all of the key findings of the profile into an overview of the companys prospects to the end of the forecast period, including an analysis of the companys key strengths, weaknesses, opportunities, and threats (SWOT analysis).
Strategic insight
The strategic insight chapter analyzes the strategic implications of the companys outlook, identifying key challenges facing the company and discussing areas where the company has gained a strategic advantage over its competitors.
Company overview
The company overview chapter details the companys history and current structure, outlining any other business sectors in which the company operates.
Data sourcing
Sales data
All Datamonitor PharmaVitae company profiles use company-reported sales and financials data.
Analyst consensus
All prescription pharmaceutical forecasts have been made by Datamonitor. However, the Company Analysis team also uses analyst consensus (from at least three individual brokers) to derive non-prescription pharmaceutical sales and operating cost ratio forecasts.
Executive Summary
Executive Summary
Executive Summary
through the Humira/CAT legacy agreement), Eli Lilly, and Bristol-Myers Squibb could be tempted into doing a deal with Abbott in the run-up to the separation.
Figure 2:
Abbotts prescription pharmaceutical performance, sales ($m) and growth rate (%), 200517
DATAMONITOR
Executive Summary
Table 2:
Product
Humira Sevorane AndroGel Synthroid Creon Lupron Kaletra Biaxin TriCor/Trilipix Influvac Duodopa daclizumab Duphaston Betaserc
7,932 756 875 638 630 810 1,170 542 1,692 210 93 0 223 233
11,136 846 731 690 607 565 546 524 450 373 345 311 286 283
+3,204 Increased sales on indication expansion; will account for 48.9% of Abbott pharmaceutical revenues in 2017 +90 Anesthetic drug; modest growth in emerging markets expected -144 Testosterone gel loses market share in US +52 Continued protection from generics due to bioequivalence issues -23 US patent expiry offset by emerging market growth in near term -245 Decline due to US patent expiry; depot formulation offers relative barrier to generics after 2013 expiry -624 Anti-HIV drug, intense competition from newer therapies, US generic erosion following patent expiry in 2015 -18 Ex-US revenues of antibiotic -1,242 Fibrate franchise under threat when earlier formulation TriCor is subjected to generic substitution for the first time from 2012 +164 Influenza vaccine gained in Solvay acquisition +252 Intestinal L-dopa gel used for Parkinsons disease, in development for US market +311 Gained in facet acquisition, anti-interleukin-2 humanized antibody in development for multiple sclerosis +63 Branded generic from Solvay used in female reproductive indications +50 Branded generic from Solvay used in Mnires disease
22,730
22,776
+46 Overall sales projection is flat for Abbotts pharmaceutical division (soon to be spun out as AbbVie), as generic erosion will be eliminated by continued growth of best-seller Humira
Executive Summary
Executive Summary
Figure 3:
Source: company-reported information; Datamonitor prescription pharmaceutical sales forecasts; analyst consensus forecasts
DATAMONITOR
Executive Summary
Table 3:
2011 ($m)
2017 ($m)
+46 Very flat outlook as positive drivers are neutralized by negative resistors +1,033 +1,079 Growth slowdown due to negative forces impacting prescription pharma business
Operating profit
5,350
6,310
+960 Steady operating profit expectations provide Abbott with impetus to perform separation in search of greater efficiencies across its diverse businesses
Note: totals may not sum due to rounding. COGS = cost of goods sold; S,G&A = selling, general, and administrative expenses.
Source: company-reported information; Datamonitor prescription pharmaceutical sales forecasts; analyst consensus forecasts
DATAMONITOR
Executive Summary
SWOT analysis
Strengths
Multiple M&A deals in the pharma space, such as Solvay, Facet, Piramal, and Kos, have diversified Abbotts therapy area offerings and global geographic presence. Approval of additional indications for Humira (adalimumab) and Abbotts strong branding have led to an increase in total sales. Humira sales are expected to increase by $3.2bn between 2011 and 2017, making it the biggest selling pharmaceutical with overall sales of $11.1bn in 2017. As part of Abbotts M&A strategy, the company has also been acquiring companies in a number of nonpharmaceutical markets, thus diversifying its healthcare portfolio. Along with organic growth, the overall result has been an increase in non-pharmaceutical revenues from $8.3bn in 2005 to $16.1bn in 2011. With a significant non-pharma revenue base now in place, Abbott has taken the decision to split its innovative pharma business (naming it AbbVie) from its diversified offerings across nutritionals, diagnostics, and devices (as well as its ex-US mature branded generics portfolio) in search of greater transparency and better long-term investor returns.
Weaknesses
As evidenced by Abbotts launch portfolio, the companys late-stage pipeline is relatively weak, contributing only an additional $429m over the forecast period. Much of the companys development is in Phase II, soon to enter Phase III, so its pipeline potential will not be realized until after the forecast period. With a weak launch portfolio and declining sales of a number of key products, Abbotts reliance on Humira sales is quite prominent. This dependency is forecast to increase to almost 50% by 2017, a figure that will be even higher when the AbbVie separation is complete, since around $4bn from mature pharmaceutical products will be retained by Abbott, leaving Humira accountable for an even higher percentage of AbbVies resulting sales. Many of Abbotts key products will face patent expiration over the forecast period. Notable examples of forthcoming patent expires include TriCor (fenofibrate), Niaspan (nicotinic acid), Kaletra (lopinavir + ritonavir), and Zemplar (paricalcitol), erosion of which will greatly undermine the position of the newly formed AbbVie over the coming years, placing yet further pressure on Humira.
Opportunities
Abbott is intent on remaining innovative across a number of therapy areas. Currently, the company has compounds spanning oncology, hepatitis C, multiple sclerosis, immunology, endometriosis, urology, neurology, and psychiatry. A lot of these are in Phase II, meaning that AbbVie will not truly commercially benefit from these developments until beyond 2017. A key growth strategy of Abbott has been geographic expansion, as seen with its 2010 acquisition of Piramal Healthcare Solutions. This deal instantly gave Abbott a presence in India, one of the fastest-growing emerging markets, as well as diversifying its product portfolio. It is thought that Abbotts newfound Indian presence will be retained by the company when it spins off its innovative pharma operations, as outlined by the companys
Executive Summary
intention for AbbVie to focus on the developed markets, while Abbott will itself seek growth from developing markets. The spin-off of AbbVie is a clear piece of opportunism by Abbott, as it appears to have done as much as it can within innovative pharma and has therefore taken the decision to move towards revenue streams with greater long-term stability. With challenges intensifying, the philosophy is that Abbotts innovative pharma business will be better positioned to respond to these challenges if it operates alone, with higher margins and therefore higher levels of cash to invest in growth opportunities.
Threats
As outlined, a number of Abbotts key products are facing the prospect of generic erosion over the coming years, including TriCor/Trilipix, Niaspan, and Kaletra. The resulting threat is obvious, with more than $4bn in annual revenues at risk of disappearing over the next 6 years. Competition from new, advanced therapies in Abbotts key disease markets may also negatively impact sales, one example being the launch of Pfizers Janus kinase inhibitor tofacitinib, which could impact the market share of Abbott's leading franchise, Humira. Given how heavily Abbott, and subsequently AbbVie, relies on Humira, the threat of biosimilars to Abbotts longterm commercial performance is significant. The primary patent on Humira expires on December 31, 2016, around which time Datamonitor anticipates the entry of the first biosimilars for other monoclonal antibodies such as Rituxan (rituximab; Biogen) and Remicade (infliximab; Johnson & Johnson). The entry of Remicade biosimilars could indirectly impact Humiras market share, while the entry of direct biosimilar competition would be even more detrimental to Abbott. However, should biosimilars come into play, Abbott may derive some additional protection from intellectual property associated with the Humira Pen delivery device.
Table of Contents
TABLE OF CONTENTS
About Datamonitor Healthcare About Datamonitors Company Analysis team Data sourcing Scope of Abbott analysis 3 PharmaVitae Explorer database Analysis structure Data sourcing Executive Summary Key findings Abbott prescription pharmaceutical sales outlook Abbott financial outlook SWOT analysis Strategic Insight Launch/core/expiry analysis M&A dictates Abbotts corporate strategy in run-up to AbbVie separation Abbott has the leading share of the lucrative autoimmune disorder market Weak pipeline undermines growth expectations Innovative pharma split imminent Company Overview Key findings Background Corporate structure M&A history Operating Performance Analysis Key findings 29 29 29 30 31 33 33 19 19 21 22 24 25 6 6 7 10 13 4 4 5 2 2 2
Reconciliation between PharmaVitae-formatted prescription pharma sales and company-reported total sales, 200511 34 Operating costs and profit analysis Appendix Exchange rates About Datamonitor Healthcare 40 40 40 35
Table of Contents
Ask the analyst Datamonitor consulting Disclaimer 41 41 41
Table of Contents
TABLE OF TABLES
Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: 11 Table 11: Table 12: 17 Table 13: Datamonitors established pharmaceutical company coverage, 2012 Abbott key product overview ($m), 201117 Abbotts financial performance ($m), 201117 Abbott launch, core, and expiry portfolio overview ($m), 201117 AbbVie product portfolio sales ($m), 201117 AbbVie operating performance ($m), 201117 Abbott key merger and acquisition deals, 200111 Total Abbott sales by business unit ($m), 200511 Abbott operating revenue/cost analysis ($m), 200511 3 9 12 19 26 27 31 34 37
Abbott operating cost ratio analysis (percentage of total revenues), 2005 37 Abbott operating revenue/cost analysis ($m), 201117 38
Abbott operating cost ratio analysis (percentage of total revenues), 2011 39 Exchange rates, 2012 40
Table of Contents
TABLE OF FIGURES
Figure 1: Figure 2: rate (%), 200517 Figure 3: Figure 4: Figure 5: (%), 200517 Figure 6: The PharmaVitae Explorer 4
Abbotts prescription pharmaceutical performance, sales ($m) and growth 8 Abbotts financial performance ($m), 200517 Abbott launch/core/expiry configuration ($m), 201117 11 20
Leading companies in the immunology and inflammation biologics space 22 Abbott operating revenue/cost analysis ($m), 200517 36
Strategic Insight
2011
2012
2013
2014
2015
2016
2017
201117 diff
0 3,433 19,297
0 2,814 20,212
70 2,654 20,259
Total
22,730
23,026
22,983
22,644
23,056
23,171
22,776
+46
0.0
Note: totals may not sum due to rounding. CAGR = compound annual growth rate.
DATAMONITOR
Strategic Insight
When looking at Abbotts outlook segmented by lifecycle stage, it is possible to get an accurate view of how the company is currently positioned to perform in the long term. The current expectation for Abbott is one of poor pipeline performance over the next 6 years, with only $430m in sales coming from new molecular entities. In terms of expiry threat, Abbott is overall neutral, which is primarily down to the fact that Humira (adalimumab), which will expire over this timeframe, is set to continue growing and will thus override the negative sales trends of the remaining components within Abbotts expiry portfolio. The result is a positive growth expectation of $664m from the companys expiry portfolio. Core sales, which in Abbotts case are made up of a diverse group of mature products, will suffer negative sales growth of just over $1bn between 2011 and 2017. The sales trends across all three portfolios will effectively neutralize each other, resulting in a flat sales balance for Abbott of $46m on current reflection. Figure 4: Abbott launch/core/expiry configuration ($m), 201117
25,000
+430 -1,048
20,000
+664
Sales ($m)
15,000
10,000
5,000
Strategic Insight
Strategic Insight
Abbott has the leading share of the lucrative autoimmune disorder market
Abbotts leading product, both in terms of sales and long-term growth contribution, is the self-injectable fully human monoclonal antibody (MAb) treatment Humira (adalimumab). Like many of the leading biologics in the autoimmune disorder space, Humira is targeted against tumor necrosis factor alpha (TNF-alpha), a potent pro-inflammatory mediator that plays a pivotal role in a wide range of human inflammatory diseases. Humira was first launched in the US in January 2003 for adults with moderately to severely active rheumatoid arthritis (RA) and has since made rapid clinical progress, gaining authorization to be used for a much wider range of immunological diseases across the seven major markets (the US, Japan, France, Germany, Italy, Spain, and the UK) and the rest of world (RoW) territories. Humira is now also indicated for psoriatic arthritis, ankylosing spondylitis, Crohn's disease, psoriasis, ulcerative colitis, and juvenile RA, which is a comprehensive range of autoimmune disorder approvals.
Figure 5:
Leading companies in the immunology and inflammation biologics space (%), 200517
DATAMONITOR
The above chart depicts the market shares of the leading companies in the immunology and inflammation (I&I) biologic space. Abbott is sat in the number one spot in terms of market share, which, in 2011, stood at 28.3% of the I&I biologic sales among the leading eight companies in this segment. Abbott has assumed this market-leading position due to the considerable success of Humira as the first fully human, self-injectable anti-TNF biologic, as well as the fact that Humiras
Strategic Insight
competitors, chiefly Enbrel (etanercept; Amgen/Pfizer/Takeda) and Remicade (infliximab; Johnson & Johnson), are sold through region-specific partnerships. In Humiras case, Abbott is almost solely responsible for its marketing (the exception being in Japan, where Eisai promotes the drug), and as such, Abbott has retained a higher portion of worldwide sales for its therapy than other companies. In this regard, if added together, Remicade marketers Johnson & Johnson and Merck, and Enbrel marketers Pfizer and Amgen are much closer to Abbott in terms of market share.
Strategic Insight
Despite growing competition, physicians continue to favor Humira in the anti-TNF drug class and in growing indications. As such, Datamonitor expects sales of Abbotts flagship biologic to continue expanding over the forecast window. Relying so heavily on one product, however, renders Abbotts long-term position exposed to the fortunes of its antibody therapy.
Strategic Insight
Strategic Insight
Table 5:
2011
2012
2013
2014
2015
2016
2017
201117 diff
Humira TriCor/Trilipix Kaletra Niaspan AndroGel Lupron Sevorane Synthroid Creon Norvir Zemplar Synagis Duodopa Rest of portfolio
7,932 1,692 1,170 976 875 810 756 638 630 408 406 578 93 562
8,932 1,464 1,116 820 820 756 767 645 792 461 359 597 106 573
9,794 546 1,068 687 757 707 779 666 876 549 193 610 147 677
10,481 532 978 105 778 666 800 680 778 204 119 618 192 781
11,002 508 945 50 816 629 816 687 722 152 90 623 246 896
11,178 481 841 35 844 595 831 690 655 101 86 626 303 1,058
11,136 450 546 22 731 565 846 690 607 98 83 628 345 1,204
+3,204 -1,242 -624 -954 -144 -245 +90 +52 -23 -310 -323 +49 +252 +642
5.8 -19.8 -11.9 -46.9 -3.0 -5.8 1.9 1.3 -0.6 -21.1 -23.2 1.4 24.4 13.5
Total revenues
17,527
18,206
18,055
17,713
18,183
18,325
17,951
+423
0.4
Note: totals may not sum due to rounding. CAGR = compound annual growth rate.
Source: Datamonitor
DATAMONITOR
Strategic Insight
Table 6:
2011
2012
2013
2014
2015
2016
2017
201117 diff
Operating profit
3,856
4,096
4,153
4,162
4,364
4,490
4,488
+632
2.6
Note: totals may not sum due to rounding. CAGR = compound annual growth rate; COGS = cost of goods sold; S,G&A = selling, general, and administrative expenses.
Source: Datamonitor
DATAMONITOR
In terms of operating performance, AbbVie has every chance of being a >20% margin business, despite increasing pressures at the top line. The focus on prescription pharmaceuticals, which typically offer higher margins than Abbotts other business areas such as diagnostics and nutritionals, will help to tip the balance in favor of AbbVie as far as its bottom line goes. Higher gross profits associated with the relatively low manufacturing costs of pills and narrow portfolio (somewhat contradicted by Humiras expensive production process), and a refined commercial focus on major markets, which could result in lower S,G&A spend, will collectively provide a platform for improved operating profits, despite continued R&D investment. Based on a multiple of around 12 times estimated operating profits of around $4bn, AbbVie would have a market cap in the region of $45bn50bn, effectively pricing it out of a straightforward cash acquisition. If AbbVie is the subject of M&A interest, a deal would likely be conducted through an all shares deal, or a mix of shares and cash, with a number of companies potentially lining up to get their hands on what will become the best-selling prescription pharmaceutical worldwide, Humira. While it seems unlikely, a number of struggling Big Pharma companies could be motivated into a merger with AbbVie, gaining ownership of its prized assets while realizing operational synergies in the process. AstraZeneca, which already has a connection with Abbott through its acquisition of CAT, the original developers of Humira, is one such company that fits the bill, as is Eli Lilly, another company with big expiry-driven declines over the next few years. Although AbbVie will be perfectly structured for M&A, the company itself is unlikely to seek such a move unless an offer is made that will be difficult to ignore. Ultimately, Abbotts decision to separate its research-based pharma offering is a strong strategic move after what has been a difficult period for the company, at least in terms of pipeline productivity. Challenges are intensifying across all disease areas that Abbotts pharma business operates in, and although Humira continues to add impressively to its top line, the opportunities for diversified growth are limited for Abbott. The company will feel that its innovative pharma business will be
Strategic Insight
better prepared to deal with imminent challenges if it existed in a standalone operating structure, with greater transparency and indeed cash flow thanks to its focus on higher-margin pharmaceuticals. Investors have been assured that their existing Abbott shares will convert into a volume of shares in AbbVie and Abbott paying a dividend equal to that if they remained a single company, while from a long-term earnings perspective, it will be hoped that the move will strengthen the earnings potential of each business, notably that of AbbVie. These assets could of course be best utilized if absorbed by a company of similar structure and focus, allowing the realization of synergies and therefore higher levels of profitability on revenues generated by AbbVies assets. To this end, the M&A route could be the best way forward for AbbVie.
Company Overview
Background
Abbott Laboratories is a global broad-based healthcare company with commercial interests spanning pharmaceutical, diagnostic, vascular, and nutritional markets. It employs 90,000 people across over 130 countries worldwide, and operates global activities from its suburban headquarters in Chicago, Illinois. In 2011, Abbott posted total revenues of $38.9bn, making it one of the leading healthcare companies worldwide. Abbott is also among the top 100 largest companies worldwide in terms of market capitalization. Abbott invests heavily in R&D, spending $4.1bn in 2011.
Company Overview
Corporate structure
Pharmaceuticals
From its inception, Abbott has primarily been a pharmaceutical company. Currently, Abbott has pharmaceutical products for both adults and children in many therapy areas. Abbotts principal products include Humira (adalimumab), the TriCor (fenofibrate) franchise, Kaletra (lopinavir + ritonavir), and Niaspan (nicotinic acid).
Nutritionals
Abbotts nutritional division was established in 1932 with the introduction of Haliver Oil and Viosterol. At the present time, the nutritional division includes products for both adults and children, with products such as baby formula (Similac and Isomil) and the adult nutritional supplement, Ensure.
Diagnostics
In 1946, Abbott became the first pharmaceutical company to build a special laboratory for radioactive pharmachemicals, which would later allow the company to develop its diagnostic division. Upon the launch of Radiocaps in 1953, Abbotts diagnostic division was created, and it later expanded to include hematology systems diagnostics, in vitro diagnostics, molecular diagnostics, and the point-of-care systems.
Vascular
Upon the acquisition of Perclose, Inc. in 1999, Abbott launched its vascular division. Abbotts vascular division combines medical devices with pharmaceuticals to treat vessel diseases of the heart and arteries. Products include balloon stents (Emboshield and Xact Carotid Stent) and closure technologies (Perclose A-T, Perclose ProGlide, and Prostar).
Other
Included under Abbotts "other" businesses are its diabetes, vision technologies, and animal health products. The diabetes product line began in 2004 with the acquisition of TheraSense, Inc. and includes glucose monitoring systems, test stripes, and insulin syringes. After the acquisition of Advanced Medical Optics, Abbotts vision technologies products emerged. Abbotts animal health business was started by combining its pharmaceutical, nutritional, and medical device knowledge to develop healthcare for the veterinary market. These products, including animal pharmaceuticals, nutritional supplements, and critical care medical devices are currently marketed internationally.
Company Overview
M&A history
Table 7 details Abbotts key acquisitions over recent years that are equal to or exceed $400m. Table 7: Abbott key merger and acquisition deals, 200111
Year
Acquired company
Deal type
6,900 Added rights for Humira, Synthroid, Rytmonorm/Rythmol, and Reductil/Meridia 4,100 Xience V and ZoMaxx drug-eluting stents 3,700 Lipid management portfolio comprising Niaspan and Advicor. Also added Cardizem LA and Teveten, both for hypertension 1,400 Refractive technologies, corneal products, contact lens cleaning systems, eye drops 400 Ophthalmic medical devices 6,200 Additional $3.5bn in annual pharma sales; AndroGel, Creon, Lipanthyl 450 Anti-interleukin-2 receptor monoclonal antibody daclizumab for multiple sclerosis, pipeline oncology, and immunology biologics 2,120 Indian generics business
2011
Acquisition
DATAMONITOR
M&A strategy
Abbott has been very active in M&A since the turn of the century, with acquisitions of Perclose (a leading arterial closure device manufacturer), BASF AGs pharmaceutical business (a deal that included the global operations of Knoll Pharmaceuticals), Guidant's vascular business, and TheraSense, a leading blood glucose-monitoring business. Recent M&A deals conducted by Abbott include cardiovascular specialist Kos Pharmaceuticals, Advanced Medical Optics, and, most recently, Solvay, Facet Biotech, and Piramal Healthcare Solutions, which will bolster Abbotts marketed and developmental portfolios. In 2004, Abbott spun off its hospital products business as Hospira, a wholly independent, publicly traded company. Hospira is now one of the largest global specialty pharmaceutical and medication delivery companies serving the hospital market. The company looked to follow this divestment with the sale of its diagnostics business unit to GE Healthcare for a proposed fee of over $8bn in a move that would have further enhanced Abbotts focus on its more profitable pharmaceutical business unit. However, this deal fell through and Abbott has since retained its diagnostics unit, which has been hampered by manufacturing issues. While Abbott has historically relied heavily on M&A as a growth strategy, the imminent separation of its pharmaceutical business will overshadow its other deal-making activities. Abbott has effectively used M&A to help grow its pharma
Company Overview
business to a critical level, at which point the company is now looking to major restructuring in order to provide the catalyst for long-term growth and indeed survival in the highly competitive prescription pharma market.
Reconciliation between PharmaVitae-formatted prescription pharma sales and companyreported total sales, 200511
Table 8:
2005
2006
2007
2008
2009
2010
2011
Total revenues
22,338
22,476
25,914
29,528
30,765
35,167
38,851
9.7
Note: totals may not sum due to rounding. CAGR = compound annual growth rate.
DATAMONITOR
Abbott has positioned itself across a diverse range of healthcare segments. Pharmaceuticals provide the clear majority of sales, both in absolute terms and in terms of historical growth, with annual sales from pharmaceuticals increasing by $8.4bn between 2005 and 2011, reaching $22.4bn in 2011. All of Abbotts other business units recorded growth over this period, with the fastest expansion coming from its vascular business unit, which, like Abbotts other business units, was dramatically boosted by M&A deals (specifically the acquisition of Guidants vascular business).
Abbott has continued to diversify its focus within healthcare with the acquisition of Advanced Medical Optics (now Abbott Medical Optics) in 2009, which helped to increase its "other" revenue line.
Overall, Abbott has achieved significant growth to become the multi-disciplinary healthcare giant that it is today. Total revenues have grown at an impressive compound annual growth rate of 9.7% over 200511, and while of course little of this growth has been derived from organic growth channels, with Abbott continually driven by M&A expansion and subsequent revenue growth from acquired product lines, it is now positioned as a leader across multiple fields.
Figure 6:
Source: company-reported information; Datamonitor prescription pharmaceutical sales forecasts; analyst consensus forecasts
DATAMONITOR
2005
2006
2007
2008
2009
2010
2011
Operating profit
4,362
2,042
4,579
5,694
6,236
6,089
5,753
4.7
Note: totals may not sum due to rounding. CAGR = compound annual growth rate; COGS = cost of goods sold; S,G&A = selling, general, and administrative expenses.
DATAMONITOR
Table 10:
2005
2006
2007
2008
2009
2010
2011
200511 ppt
Total revenues
100.0
100.0
100.0
100.0
100.0
100.0
100.0
+0.0
Operating profit
19.5
9.1
17.7
19.3
20.3
17.3
14.8
-4.7
Note: totals may not sum due to rounding. COGS = cost of goods sold; ppt = percentage point change; S,G&A = selling, general, and administrative expenses.
DATAMONITOR
2011
2012
2013
2014
2015
2016
2017
Operating profit
5,753
5,868
6,455
6,104
6,547
6,686
6,310
1.6
Note: totals may not sum due to rounding. CAGR = compound annual growth rate; COGS = cost of goods sold; S,G&A = selling, general, and administrative expenses.
Source: company-reported information; Datamonitor prescription pharmaceutical sales forecasts; analyst consensus forecasts
DATAMONITOR
Table 12:
2011
2012
2013
2014
2015
2016
2017
201117 ppt
Total revenues
100.0
100.0
100.0
100.0
100.0
100.0
100.0
+0.0
Operating margin
14.8
14.8
16.2
15.4
16.3
16.6
15.8
+1.0
Note: totals may not sum due to rounding. COGS = cost of goods sold; ppt = percentage point change; S,G&A = selling, general, and administrative expenses.
Source: company-reported information; Datamonitor prescription pharmaceutical sales forecasts; analyst consensus forecasts
DATAMONITOR
Appendix
Table 13:
Currency code
Currency name
Australian dollar Swiss franc Chinese renminbi Danish krone Euro Indian rupee British pound US dollar Japanese yen
Source: OANDA
DATAMONITOR
Appendix
Team members are regularly interviewed by, for example, the Wall Street Journal, the BBC, Washington Post, Financial Times, In Vivo, Pharmafocus, and MedAdNews, and frequently present at industry conferences in the US and Europe.
Datamonitor consulting
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