Abbott Laboratories, long known for selling a mix of drugs, medical implants and baby formula, said on Wednesday it would spin off its branded drug business and become two separate companies with more distinct identities.
The split-up would free Abbott from the risks and obligations of developing innovative pharmaceutical drugs, leaving the company with a more predictable business built around nutritional formula, generic drugs and heart stents.
BLOCKBUSTER
In recent years, Abbott has relied on a single blockbuster drug, the anti-inflammatory drug Humira, to help drive double-digit sales growth. The injectable drug posted sales of US$6.5 billion last year, nearly a fifth of the company’s total sales.
However, Abbott’s reliance on the drug has weighed on the company’s stock and overshadowed performance across other businesses. Humira loses patent protection in 2016 and no obvious successor has appeared in the company’s pipeline. Shares in Abbott have been virtually flat over the past two years at about US$52. In that times the S&P 500 index has climbed about 10 percent.
CLEARER OPTIONS
Abbot Laboratories chief executive Miles White said on Wednesday that the split would benefit both new companies and give investors clearer options.
“What happened here is the pharma piece got so big and is so different, that these two investments make sense separately and both are of a critical mass and size that they have great sustainability going forward as independent companies,” White told analyst on a teleconference call.
Abbott, based in North Chicago also reported a 66 percent decline in third-quarter net income as it set aside US$1.5 billion for a legal reserve related to an investigation into its marketing of the drug Depakote. The company said it is in discussions with the US Department of Justice to settle an investigation into whether Abbott promoted the anti-seizure drug to control aggression and agitation in seniors, an unapproved use.
LAYOFFS
Separately, Amgen Inc said on Wednesday that it would lay off about 380 US and British employees in research and development, nearly 6 percent of its research and development staff, as it restructures those operations.
Amgen, the world’s largest biotech company by revenue, said the layoffs were targeted to enable the company to better allocate its research and development resources.
Company spokeswoman Christine Regan said the affected employees were notified on Wednesday. They work at several Amgen sites in the US and the UK.l
Amgen, which is based in California, has a total of about 17,600 employees worldwide, including about 6,700 in research and development.
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