Abbott Laboratories’ purchase of Solvay SA’s pharmaceutical unit, for about 4.8 billion euros (US$7.1 billion), will give it full control of the TriCor cholesterol drug and a bigger presence in emerging markets.
Abbott will pay 4.5 billion euros in cash, with as much as 300 million euros in contingent payments between 2011 and 2013. The milestone payments relate to whether products perform well. The agreement also includes the assumption about 400 million euros of pension liabilities, Solvay said in a statement yesterday.
The purchase will lower Abbott’s dependence on the arthritis drug Humira, said Larry Biegelsen, a Wells Fargo Securities LLC analyst, in a report on Friday. The company’s biggest product with US$4.5 billion in revenue last year, Humira risks losing sales as consumers cut spending. Solvay, which also makes chemicals and plastics, wasn’t big enough to compete in pharmaceuticals, chief executive officer Christian Jourquin said.
“If the deal is completed, it would reduce Humira’s share of Abbott’s total sales to 15 percent from the current level of 18 percent,” Biegelsen wrote.
Based in New York, he recommends holding Abbott shares.
The deal also suggests Abbott is comfortable with the landscape for TriCor and TriLipix, cholesterol drugs it co-promotes with Solvay. Both use the active ingredient fenofibrate, and account for about 20 percent of Brussels-based Solvay’s pharmaceutical sales, Biegelsen wrote.
TriCor faces generic competition by 2011 and Abbott is seeking regulatory approval to market TriLipix in combination with AstraZeneca Plc’s Crestor. TriCor generated US$1.34 billion in revenue last year for Abbott, of Abbott Park, Illinois, and 511 million euros for Brussels-based Solvay.
Solvay rose 2.15 euros, or 2.9 percent, to 76.88 euros at 9:10am in Brussels, giving the company a market value of 6.5 billion euros. Abbott rose US$0.39 to US$47.33 in New York Stock Exchange composite trading on Friday.
Buying Solvay’s drug business represents a change of course for chief executive officer Miles White, who has been acquiring medical devices and eye products to reduce Abbott’s reliance on medicines as the company battles generic competition to its anti-seizure treatment Depakote.
Solvay’s pharmaceutical unit brought in 2.7 billion euros in revenue last year, 24 percent of the company’s total sales. It focuses on therapeutic areas such as cardiometabolics, which includes its best-seller, TriCor, and neuroscience, including the Duodopa treatment for Parkinson’s disease.
TriCor is used to reduce triglycerides and adjust cholesterol levels. Solvay’s other top-selling products are Androgel, a testosterone gel, and Creon, a pancreatic enzyme to treat cystic fibrosis.
The purchase may add to Abbott’s earnings immediately, UBS analyst Bruce Nudell wrote in a research note on Friday. He cited a 5 percent to 7 percent increase to cash earnings-per-share in the first three years.
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