A crucial step
The BASF acquisition was critical to Abbott's ability to turn around its pharmaceutical business. The company, which logged US$16 billion in sales in 2001, sells an array of health care products, including hospital supplies, drugs, medical devices and diagnostics tests. But its pharmaceutical business lagged far behind the industry's top players, such as Pfizer, Merck and Eli Lilly.
The acquisition gave Abbott a pipeline of promising drugs, chief among them Humira. It also increased its revenues from drug sales to US$9 billion in 2001, edging Abbott into the ranks of the industry's top 10 players.
"The strategy we've set for the pharmaceutical business is to consistently develop breakthrough drugs to meet unmet medical needs," said Dr. Jeffrey M. Leiden, the head of Abbott's pharmaceutical division. "We've told the company that we are going to invest in the science. You have to build the cycle. We invest in the science to get growth and use that growth to reinvest in the company. Humira is an example of that."
Analysts predict that the investment in marketing and the ongoing clinical testing of Humira as a potential treatment for Crohn's, psoriasis and other forms of arthritis will cost more this year than the US$150 million to US$170 million they estimate the drug will generate in its first year of sales. But with the company's ability to turn around its drug business resting largely on Humira's success, analysts said, the investment is critical.
"It's a bet-the-company scenario," said Ted Huber, an analyst with Banc of America Securities. "If Humira is a success, it's a big boost for Abbott's science and its pharmaceutical business. If the drug flops, it puts Abbott in a difficult spot. They have a pipeline of other drugs that are important to the company's growth. They need Humira to support the development of those drugs. And to become a major player, they have to be more than a one-drug success story."
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