Bright Prospects For The New Abbott

| About: Abbott Laboratories (ABT)

As of January 1, Abbott Laboratories (NYSE:ABT) and AbbVie began operating as independent companies. For both companies it means a new beginning, each inherit part of the assets and traditions from their predecessor company and both have to design ways to achieve more with less.


Abbott declared a quarterly common dividend of $0.14 per share. Abbott's dividend is payable on Feb. 15, 2013, to shareholders of record on Jan. 15, 2013.

On Jan. 4, 2013, the board of directors of AbbVie declared the company's quarterly cash dividend of $0.40 per share. AbbVie's cash dividend is also payable on Feb. 15, 2013, to shareholders of record at the close of business on Jan. 15, 2013.

Abbott's annualized cash dividend of $0.56 per share, combined with AbbVie's annualized cash dividend of $1.60 per share, equals a total annualized cash dividend of $2.16 per share, compared to the annualized cash dividend of Abbott, prior to separation, of $2.04 per share.

Future quarterly dividends are subject to approval by each company's board of directors.

AbbVie's dividend is proportionally higher as a percentage of earnings per share than Abbott Labs, which is proportionally lower. But both managements plan to grow the dividend in the future.

Traditionally investors expected steady returns from Abbott and they transfer that expectation to the successor companies.


Nutrition is the fastest growing segment in Abbott's portfolio and has the best chance for margin improvement. For 2012, the operating margin improved nearly 250 basis points over 2011 mainly due to driving down freight and distribution costs and optimizing the supply chain. The company has shifted to direct distribution in certain foreign markets.

Abbott is working hard on its nutrition business, 80 new products were launched in 2012 and 100 clinical trials started over the last three years.

In 2012 worldwide nutrition sales were $6.471 billion.

In the U.S, the company maintained its market share for the leading infant formula Similac and delivered double digit growth of both PediaSure and Ensure.

The company rolled out several new Similac products. Similac Total Comfort was launched in four key markets: Hong Kong, Taiwan, Malaysia and Russia, and it is now available in 19 countries. Similac Stage 2 and HQPro, a protein powder product were launched in India.

Shifts in demographics are closely followed by the company. Abbott introduced in the U.S. Ensure Complete, a nutritional shake for older adults that is beneficial to the muscle, heart, immune system and the bones. Complete shakes feature a special ingredient, Revigor, and 13 grams of protein to help promote muscle health.

Emerging market sales comprised more than 40% of the nutrition sales and grew double digits for the full year for both pediatric and adult.


Abbott is the global leader in drug eluting stents.

Xience Xpedition

Xience Xpedition is a next-generation stent, featuring a new delivery system and a variety of sizes with diameters available from 2.25 mm to 4 mm, including a unique 3.25 mm diameter, and lengths from 8 mm to 38 mm.

Vascular device sales reached $3.071 billion in 2012. This business grows most rapidly outside the U.S. from where now more than 60% of the sales originate.

Xience Xpedition was launched in Europe in August, in the U.S. recently and in Japan a rollout is planned by mid-year.

Abbott's Xience drug eluting stents are the only ones in the U.S. market proven safe for direct stenting. Direct stenting refers to stent positioning and deployment without prior balloon dilatation of the stenosis, an innovation that saves time and money.

The Absorb stent

Absorb is the world's first drug eluting bioresorbable vascular scaffold (BVS).

Absorb is made of plastic and coated with a drug called everolimus to inhibit in-stent thickening in the coronary arteries. Everolimus was developed by Novartis (NYSE:NVS) and licensed to Abbott.

It is available in more than 30 countries across Europe and parts of Asia Pacific, including India and Latin America. Not yet approved in the U.S. The Absorb III clinical trials are ongoing, and the results will be used to support the U.S. application.

Abbott calls Absorb a "scaffold" meaning that it is a temporary structure, unlike a metal stent, which is a permanent implant. The scaffold provides support to the blood vessel until the artery can stay open on its own, and then dissolves naturally.

The potential benefits of a scaffold are significant. The vessel may expand and contract as needed to increase the flow of blood to the heart in response to normal activities such as exercising. Also the need for long-term treatment with anti-clotting medications may be reduced; and future interventions would be unobstructed by a permanent implant.


MitraClip is a less invasive device for the treatment of patients with mitral regurgitation, the most common heart valve disease in the world. Mitral regurgitation affects more than 8 million people in the United States and Europe, and is four times more prevalent than aortic stenosis. Abbott's MitraClip system is available in Europe and parts of Asia and is currently under FDA review.

Peripheral Artery Disease (PAD)

Abbott has launched the Absolute Pro Vascular Self-Expanding stent system and the Omnilink Elite Vascular Balloon-Expandable Stent System, both for the treatment of iliac artery disease, a form of peripheral artery disease (PAD) that affects the lower extremities.

Vision Care

In its market-leading Lasik business, Abbott is expanding its laser platform into new applications, mainly cataract surgery.

The cataract business now represents nearly 65% of Abbott's global vision care sales. Strong double-digit cataract growth were seen in emerging markets especially India and China.


More than 346 million people worldwide are living with diabetes, and the World Diabetes Foundation estimates that number will increase by nearly 27 percent by 2030.

Abbott received European approval for its test Architect HbA1c (IA) Assay which helps physicians to monitor treatment efficacy of their diabetic patients.

The HbA1c test differs from a patient-administered blood glucose test, which takes a snapshot of a patient's blood sugar level at a moment in time. The HbA1c test must be performed on a laboratory instrument.


Abbott has a portfolio of hundreds of branded generic pharmaceuticals consisting of many trusted brands throughout the world.

More than 150 new drug approvals and product launches expected in 2013.

The launches include improved formulations of trusted brands, such as Creon (treatment of exocrine pancreatic insufficiency in cystic fibrosis) and Brufen (a pain reliever), as well as new products, such as Amitiza, a treatment for chronic constipation.

The company's strategy is increasing access to the drugs for patients by operating locally in each market and building country-specific portfolios. The sales pattern with drugs is the same as other products: 60% of the drug sales are in emerging markets and 40% in developed markets.

Investor's summary

What may be considered as base line for the New Abbott is the sales figure for those products in 2012 that are inherited from Abbott Laboratories: about $21.5 billion.

Abbott's vascular revenue slumped 8.1% in the fourth quarter to $760 million, dragged down by a 24.6% slide in U.S. stent sales.

Abbott attributes the drop to the expected declining royalties from its Promus stent, which it used to supply to Boston Scientific (NYSE:BSX). Boston is now making the product itself, therefore the royalties shrink.

In spite of that 2012 was a great year, the old Abbott generated a cash flow of more than $9 billion, exceeding expectations.

In 2013 the New Abbott is looking forward to another strong year. Earnings per share are projected in the range of $1.98 to $2.04, representing double digit growth over 2012.

Abbott is well positioned to become a leader in the new healthcare environment. The company is balanced across four business segments: Branded Generics, Medical Devices, Diagnostics and Nutrition. This business mix provides the company with a diverse customer base and payer group.

Abbott holds leadership positions across all four major business segments and has many opportunities to develop its pipeline. These include next-generation diagnostic systems, medical devices in coronary, endovascular and structural heart treatment, as well as innovations in branded generics and nutrition.

These businesses have more rapid innovation cycles, local solutions and improved formulations and packaging.

New Abbott's management pledges to remain focused on financial discipline, improving margins and generating a strong cash flow, projected upwards to $4 billion in 2013.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.