Abbott Labs: Powerful Company with a Bright Future

2008 was quite an interesting and exciting year for the Healthcare sector. Each sub-sector was struck with their own disruptions and it caused industry wide job cuts and strategic maneuvers. The Obama administration has come in and new legislation will be passed most likely hurting Biotechnology, Pharmaceuticals, and Managed Care. Only time will tell who stands on top after the talks of startling changes quickly dissipates.

Abbott Laboratories (ABT)

By reading any of my recent articles you can promptly say that I am not a proud supporter of the Pharmaceuticals sector with the many headwinds they have faced in 2008 and will continue to in 2009, especially the large-caps. Patent expirations, lackluster Blockbuster drug releases, weak pipelines, and the Obama administration coming into reign will only drive down the sector through the majority of this year. However, Abbott Laboratories is definitely an exception, where luckily, pharmaceuticals are not the only revenue- generating source.

Abbott is strategically broken down into three major business segments depending on how you specifically dissect the firm: Medical, Pharmaceutical, and Nutritional. Within the Pharmaceutical segment, Abbott is most notably recognized for its blockbuster drug, HUMIRA, which in the most recent quarter showed sales increasing 50% to $1.2 billion including 67% international growth. HUMIRA is primarily used for psoriasis, where it is quickly approaching 30% total market share, but is also approved for five other uses: rheumatoid arthritis, polyarticular juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, and Crohn’s disease. The company expects full year 2008 global sales for HUMIRA of more than $4.4 billion. The market for all HUMIRA indications is now estimated to exceed $20 billion by the year 2012. Within the Medical Products segment are Abbott Vascular, Diagnostics, and Diabetes Care.

Abbott’s Diagnostics segment grew more than 15% in the most recent quarter led by strong growth in each of their three segments: core diagnostics, molecular diagnostics, and point of care diagnostics. I have always been a strong supporter of firms who invest heavily into R&D with diagnostics because I believe it is the future of healthcare. As we continue to face many difficulties with the FDA initiating additional warning labels on drugs, or “black-box,” due to serious adverse reactions, we must invest in personalized medicine, and that is exactly where diagnostics and ABT comes into play.

When looking at the Nutritional segment many popular leading brands come into play like Ensure, Glucerna, and EAS. Ensure is for people who are unable to sufficiently construct a balanced diet and need additional nutrients to live a healthy life. Glucerna is used for patients who suffer from diabetes better manage abnormal glucose metabolism. EAS is a popular supplement brand for athletes looking for that extra edge in order to achieve their performance, fitness and nutrition goals. The strategic breakdown of Abbott Laboratories’ business segments make a powerful company with a bright future, in a challenging sector.

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- Ryan Savitz

Disclosure: None.

Comments

[dzager@comc...:]

Abbott Labs has been overweighted in my portfolio for the last 20 years. However, did it escape your notice that two weeks ago 8 insiders sold over $32,000,000 of their stock. Every study I have ever seen suggests that when insiders are selling a stock will underperform the market over the next 12 months. What say you?

Feb 22 08:05 PM

[bigtime99:]

"I have always been a strong supporter..."
You look about 20 in your photograph...

Feb 22 08:27 PM

[insideMan:]

The hammer is gonna drop soon on Abbott via the Dept of Justice for problems with a hugely popular drug.

Mar 11 11:39 AM