Abbott Labs Announces Split

The leading drug maker Abbott Laboratories (NYSE:ABT) is planning to divide into two separate entities by spinning off its branded drug business said the company in a statement earlier today.

The proposed split comes as a major deviation from the company’s strategy since its inception some 123 years ago. Abbott is well known for its wide range of medical equipments and pharmaceutical products and it has continued to grow strong as compared to other pure pharmaceutical companies who had experienced losses now and then as the patents for their best selling drugs expired. Abbott’s structure has allowed the company to continually post double digit growth every quarter enabling the company to maintain their position in the market.

Today’s announcement shows that the company’s management considers the company’s operations as two separate businesses and this viewpoint is also welcome to the stockholders and investors as it will create two separate risk profiles and propositions for investments.

The drug discovery and related operations fall under high risk profiles where as generics and nutritional supplements fall under low risk and by making two separate businesses, the investors will be able to choose any one of their liking or on both as it was with the old Abbott.

Abbott recently released the report for the third quarter. According to the report, the North Chicago, Illinois based company’s net income has declined by 66 percent as it has allocated $ 1.5 billion to the legal reserve in relation to the investigation into the marketing of its drug Depakote.

The spin off of Abbott Laboratories will see the new division selling branded pharmaceutical s like Humira, the arthritis and immune disorder drug and Niapan, the cholesterol drug. The new company will be headed by the current head of Abbott’s Pharmaceutical business, Richard Gonzalez. The company estimates the new, yet to be named company’s annual revenue to be somewhere around $ 18 billion as per the estimates they have for the current year.

The remaining part of the company will be headed by the present chief executive officer, Miles White and the company’s businesses will include generics, diagnostic test drugs, medical implants, baby formula and other nutritional products. It will continue with the Abbott name and will have annual revenue of about $ 22 billion. The spinoff will allow the investors to value both the companies according to its distinctive characteristics and the new company’s shares will be distributed tot eh shareholders in tax free transactions.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.