A Look At Abbott's Vascular Division

| About: Abbott Laboratories (ABT)
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Abbott Labs (NYSE:ABT) is one of the largest healthcare firms in the U.S. It spun off its proprietary pharmaceutical division as Abbvie (NYSE:ABBV) earlier this year and is now left with four main business divisions - Nutritionals, Diagnostics, Vascular and Generic Drugs. In addition to these four divisions, it also has a portfolio of diabetes care, medical optics and other healthcare products.

In some of our previous articles, we have discussed the Nutritionals, Diagnostics and Generic Drug businesses in detail, but the vascular division has received relatively less attention. In this article we take a closer look at the business.

What Are The Major Vascular Products?

Abbott's Vascular division is in the business of manufacturing and selling coronary, endovascular, vessel closure and structural heart devices. Some of its more notable devices include:

  1. The Xience family of drug-eluting coronary stent systems
  2. Absorb, a drug eluting coronary scaffold which gets dissolved within the body
  3. Multi-Link metallic coronary stents
  4. Trek and Voyager, two varieties of coronary balloon dilatation products
  5. MitraClip, a new kind of device for correcting heart valve defects.

In the U.S. these devices are sold directly to hospitals but in international markets Abbott may also use distributors, depending on the characteristics of particular markets.

What Is The Vascular Market Like?

We estimate that the global vascular market is around $12 billion, with some other estimates as high as $15 billion, and we expect it to grow at around 6% annually over the next several years. The market is extremely competitive, as several major players compete primarily on technological advancements, efficacy and price.

What Is Abbott's Market Share?

Abbott has been an innovator in this segment, but some of its products have remained under pressure over the last few years due to intense competition and new product launches by competitors. As a result its revenues have lagged the growth of the market and its market share has been steadily declining. According to our estimates Abbott's market share in the global vascular market declined from 32% in 2010 to 26% in 2012.

Going forward, we expect the rate of decline in Abbott's market share to moderate as some of its newly launched products continue to grow. Specifically, we are optimistic about the future of products such as Xience, Absorb and MitraClip. Abbott has recently also acquired a stent manufacturing company called IDEV technologies to boost its market share.

Here is a brief look at the division's products:

Xience: Xience is Abbott's new range of drug-eluting stents. It comprises four sub-types: Xience V, Xience PRIME, Xience nano and Xience Xpedition. The company has been developing this franchise over the last few years, and it currently leads the drug eluting stent market globally. The franchise was one of the major revenue drivers of Abbott's vascular division in Q3 2013, and we expect it to continue doing so in the near future as it is launched in more countries.

Absorb: Absorb is the first-of-its-kind vascular scaffold for patients with coronary artery disease (CAD), the most common type of heart disease in the world. Its specialty is that it gets dissolved within the body after its useful life, thereby eliminating the need for a surgery to extract it. The device has seen impressive uptake in Asia despite its higher prices, and we expect that to continue in other markets when it launches there. Abbott started clinical trials for the product in the U.S. and Japan in January and June this year, respectively. [1]

MitraClip: MitraClip is an implantable device for treating patients with mitral regurgitation, one of the most common heart valve conditions which affects almost 1 in 10 individuals aged 75 and older. It is already available in various markets following European CE Mark approval in 2008, and was recently launched in the U.S. in October. [2] The device has been proven to reduce re-hospitalization rates and improve the quality of life in patients, and we expect its sales to continue increasing going forward on the back of increased demand. [3]

IDEV Technologies: IDEV Technologies is a stent manufacturing company that Abbott purchased in August this year for $310 million, net of cash and debt. [4] Its flagship stent, called SUPERA Veritas, already sells in Europe for treating blockages in blood vessels due to peripheral artery disease (PAD), a sickness that ails 27 million people in Europe and North America. In the U.S. this stent is under FDA review for the treatment of the superficial femoral artery (SFA), which is "the largest and fastest-growing segment of the peripheral market driven by the rising rates of diabetes and obesity". [5] [6] Once approved, we expect SUPERA to be as successful in U.S. as it is in Europe due to latent demand in the market.

Disclosure: No positions.