Abbott Laboratories To Part with Specialty And Generics Business Outside US
The Monk Sells His Ferrari: Abbott Laboratories To Part with Specialty And Generics Business Outside US
Generics drugmaker Mylan Inc is all set to buy Abbott Laboratories' branded specialty and generics business for tapping developed markets outside the US in a $5.3 billion deal. The deal is focused on bolstering product line and cutting tax bills.
Mylan will now have a wide array of Abbot brands to reach annual sales of around $2 billion in these markets. This includes gastroenterology drug Creon as well as pain drug Brufen and influenza vaccine Influvac. The deal is formulated for ensuring a reduction in the tax bill for Mylan.
The method through which this will be accomplished is through the movement of the tax address of the firm outside the US. This is known as tax inversion and it has become popular in several healthcare companies.
Abbot will now transfer the sold assets in the following countries- Japan, Europe, Canada, Australia and New Zealand to new publicly traded company in the Netherlands to incorporate Mylan's existing businesses as well.
Abbot is now set to receive 105 million shares of the combined firm providing it with an ownership stake of around 21% which is worth $5.3 billion. This is based on Mylan's closing stock price. Branded generics will continue to be sold by the drugmaker in emerging markets. Strong sales growth is now expected because when it comes to the patients, the numbers are rising.
Sale of generics in developed markets has been on the decline in comparison to this. This is due to price pressures in the EU. Though the deal may dent 2015 earnings of Abbot, the Chicago based firm says its proceeds will be used to buyback shares and purchase critical medical devices.
Abbot Chief Exectuve Miles White has told investors in a conference call that while the Mylan stock has been positively viewed by the company, they are not expecting to be long-term shareholders in the firm.
Mylan shares increased up to 2.7% at $51.55 on the NASDAq following the announcement of the deal. Abbot shares breached 1% at $41.66 on the NYSE. A Reuters report quoted analyst Chris Schott from JP Morgan as saying that Mylan now aims to set the ball rolling for further acquisitions following this deal with the revenue that has come pouring in from Abbott.
The deal also provides Mylan with a portfolio of more than 100 specialty and branded generic pharma products in 5 key therapeutic fields. As part of the deal, Abbott will transfer its assets to a new public firm organised in the Netherlands following which Mylan will complete the merger with a completely owned unit of the company. Abbott is set to receive 105 million shares of the combined company, giving it a 21% ownership stake. This deal clearly has winning stakes and a potential for positive growth of both partner firms.
