Abbott Laboratories (NYSE:ABT) is a key player in America's mainstream drug manufacturing industry. Its market space is, however, plagued by an unforgiving breed of competition. Belligerent competitors like Merck (NYSE:MRK), Sanofi (NYSE:SNY), Biogen Idec (NASDAQ:BIIB) and Roche (OTCQX:RHHBF) are wedged in an unending battle for the biggest piece of pie.
As an investor, I am drawn in by Abbott's swelling potential, solid fundamentals and unrivaled peculiarities. Although it is not a niche market leader, it exhibits the highest quarterly growth figures of 4%. This hammers down industry big wigs like Roche and Merck. The Former is cuddled on a record $607 billion, and there is some reasonable daylight between it and other players in the industry.
Why am I inclined towards Abbott while competitors like Roche have a stronger financial backing and seemingly offer a better deal? Being a long-term investor, I am more focused on potential and growth. Abbott manages to integrate these two vital lineaments in a single bundle. On the flip side, supposedly bigger players are too predictable and pretty much stagnant.
Marketing Controversies surround Merck
Merck has been in the center of a heated legal debate over improper marketing techniques with regards to its Vioxx painkiller. This April, a federal judge in Boston passed a heavy sentence on Merck's unethical techniques, and the industry heavyweight was compelled to fork up $321 million as a criminal fine. Hopefully, this big amount will patch up the shreds that Vioxx created. This pain killer was stamped out of the market in 2004 after analysts linked it to stroke and heart attack. An adamant Merck, however, chose to carry on with marketing the drug.
According to the legal report, Merck consciously gave misleading information about the drug's effect on the heart. Personally, I believe that these profound allegations greatly taint Merck's image. It shows that the behemoth is not willing to compete on a level ground --a display of fear and uncertainty. Such a demeanor will gnaw out confidence levels in shareholders and push away prospective investors.
Depending on the degree of damage that this news will inflict on Merck, there is a growing possibility of its stock sailing into the dreaded oversold territory. For me, this possibility is drawing closer and closer, as many of its shareholders want to cut existing ties. If this foresight materializes, investors will look for entry points into better markets like Abbott.
The drug manufacturing industry was literally rattled with excitement when Roche's imminent plans to acquire Illumina came to light early this year. This acquisition reportedly has an estimated $5.7 billion price tag and is part of Roche's bigger plan to establish a stronghold in the genetic solutions niche. Personally, I am pulled towards the edge of my seat as I am eager to know the complexities that this acquisition may attract.
As it is, the ongoing deal is on the rocks, and Illumina is not willing to accept the $51 per share price. I think that this deal may work in the advantage of smaller players like Abbott. I know that critics may be quick to argue that this is farfetched and downright biased; I honestly understand their inclination on this point.
Nonetheless, I am surefooted in my speculation, and I have compelling reasons as to why it holds water. Even without a crystal ball, any investor can tell that the Illumnia deal won't pick up. This failure will be a leaden blow to a towering Roche, which currently treads in the shadow of mishaps; a negative quarterly revenue growth and tapering net incomes couldn't say less. In my opinion, this failure will further aggravate the already dented faith in Roche shareholders.
In the event that this occurs, investors of a bullish disposition (who happen to be very many today) will sell and move to shares that exude prosperity. Abbott would definitely be a prioritized option. It bears desirable traits and arguably extends the best deal in the drug industry. This is chiefly because it gives the impression that it is dynamic and future-oriented.
Another prevalent factor that seems to be working in favor of Abbott is the fact that it knows how to carefully juggle its legal issues. Late last year, it was pulled into the courtroom after a disappointed investor filed a lawsuit over the alleged breaching of fiduciary duties. The aggrieved shareholder was exclamatory on the idea that the directors at Abbott were responsible for the breach. Although this happened towards the end of the previous fiscal year, Abbott is still reeling from its effect. This is chiefly because of the magnitude that this news had on Abbott's image.
Interestingly, a relentless Abbott has managed to plough through the deluging adversities. I believe that this speaks volumes about Abbott. It instills an innate sense of security in Abbott. It knows how to dodge the bullets and adhere to a calculated and tactful approach. This gives it the upper hand and allows it to survive in the current dynamic stock market.
In conclusion, I would say that Abbott has the much-needed potential to edge out formidable competition in the industry. All the same, Roche and Merck cannot be overlooked. That said, the main contributory factor towards my firm advocacy for Abbott is the fact that it manages to put up fight on unlevel ground. As an investor, aggressiveness and determination tap my attention. Abbott is the ideal stock for a smart, long-term investor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.