Bloomberg News

Abbott Touts $4 Billion in Drug Sales as It Pitches Spinoff

October 21, 2011

(Updates with closing shares in the ninth paragraph.)

Oct. 21 (Bloomberg) -- Abbott Laboratories, seeking to sell investors on its proposed breakup, said a pharmaceutical spinoff may gain $4 billion in extra revenue from three new therapies and expanded uses of autoimmune drug Humira.

The added revenue would come partly from drugs in development for chronic kidney disease, hepatitis C and multiple sclerosis that are expected to reach the market by 2015, said Richard Gonzalez, the chief-executive-to-be of the new business. That would add to $18 billion in sales already generated, he told investors at a conference in New York.

“On an $18 billion pharma business, that’s a significant growth rate,” Gonzalez said. “We feel good about the pipeline we have in place.”

Abbott, based in Abbott Park, Illinois, said Oct. 19 it plans to divide into two publicly traded companies next year, with one focused on prescription drugs and the other on products including medical devices, infant formula and generic drugs. Chief Executive Officer Miles White said the split would boost investor interest in businesses that had been undervalued.

Gonzalez’s sales projections sound “aggressive,” said Tim Hoyle, director of research at Haverford Financial Services in Radnor, Pennsylvania. The firm oversees $6 billion, including 1.3 million Abbott shares.

While Humira, expected to generate $8 billion in sales this year, should remain strong, the other drugs are unproven, Hoyle said today in a telephone interview.

‘Show-Me Stock’

“They’ve never been known to be a good R&D company,” he said of Abbott, which gained Humira in a 2001 acquisition. “To me, it’s a show-me stock in terms of the pipeline: Show me you can take something you’ve developed and turn it into a billion- dollar drug.”

Abbott declined less than 1 percent to $53.86 at 4 p.m. New York time. Before today, the company had gained 3 percent since the breakup announcement.

Gonzalez said bardoxolone, a drug for chronic kidney disease, may generate $1 billion in sales and go on sale in 2014. Abbott owns rights for the drug in most places outside the U.S., save for parts of Asia. It has had talks with the drug’s developer, closely held Reata Pharmaceuticals Inc. of Irving, Texas, about sharing sales within the U.S., Gonzalez said.

Daclizumab, the multiple sclerosis treatment, should be on sale by 2015, as will compounds being tested for hepatitis C, the company said. At the same time, the new drug business will seek approval to use Humira in six more disorders, he said. The medicine is already approved for six conditions, including rheumatoid arthritis and psoriasis.

China Sales

The health-products company, which will keep the Abbott name, is also poised for growth, particularly in emerging markets, said White, the current CEO. Its nutritional unit, which had $5.53 billion in revenue last year, expects to reach $1 billion in sales in China alone by 2014, he said.

White made “a strong case” for splitting Abbott at the meeting, said Michael Weinstein, a JPMorgan Chase & Co. analyst, in an interview. Still, investors are uncertain how much the two new companies will be worth, he said.

Abbott has “a more aggressive outlook for both businesses than the street,” he said. “That’ll be part of the discussion going forward -- whether the growth outlook is sustainable.”

--Editor: Andrew Pollack, Bruce Rule

To contact the reporter on this story: Alex Nussbaum in New York anussbaum1@bloomberg.net.

To contact the editor responsible for this story: Reg Gale at Rgale5@bloomberg.net


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