US drug maker divides the firm into two parts as part of a rebalancing strategy

Abbott Laboratories is to be split in two. One half, which will retain the Abbott name, will encompass its diversified medical products portfolio of branded generics, medical devices, diagnostics and nutritional products. The other will become a research-based business and will include its portfolio of pharma and biologic drugs, under a new, yet to be released, name. 

Abbott claims the aim is to strengthen the outlook for growth and shareholder returns. According to chairman and chief executive Miles White, the investment identity and operating models of the two new businesses will be very different. White will stay with the Abbott business, which has annual sales of $22 billion (?13.9 billion). The new company will be run by Richard Gonzalez, who currently heads up the pharmaceuticals business. Gonzalez has a background in biochemistry, and has been with the company since 1977.  

Humira (adalimumab), used to treat autoimmune diseases such as rheumatoid arthritis, makes up 45 per cent of its $18 billion annual pharma sales. While the patent on this biologic does not expire until 2016, there is huge potential competition from tofacitinib, an oral small molecule drug in late-stage trials at Pfizer.  

"The pharma division is massively overweight in Humira" - Andy Smith, head of corporate finance at PharmaVentures

’The pharma division is massively overweight in Humira,’ says Andy Smith, head of corporate finance at PharmaVentures. ’The demerger of the pharma division allows them to address, or even divert, this challenge. The existing management is staying with the Abbott business, which implies it will stay as it is. On the pharma side, it has already done smaller biotech acquisitions, and it makes one wonder whether there are other obvious targets. BMS (Bristol-Myers Squibb) is always mentioned as an acquisition target, and is it a coincidence that Amgen has just announced the realignment of its R&D - is it cleaning itself up to be acquired or merge with someone?’ 

It is unclear whether the split will lead to further job cuts. The 2009 acquisition of the Solvay pharma business resulted in the loss of about 3000 jobs across the business, and several site closures. Research now takes place at three sites in the US, plus Ludwigshafen, Germany, acquired along with BASF’s pharma business a decade ago. Much of its current research pipeline has been licensed in or is a late-stage collaboration. 

Aparna Krishnan, senior research analyst at IHS Global Insight, thinks this is unlikely to be the last such move within the sector. ’It is likely to trigger a trend among big pharma firms, namely Pfizer and J&J (Johnson & Johnson),’ she says. ’They may not only necessarily look at a generics - an innovative split as Abbott has done - but also potentially a consumer health-medical devices pharma split.’ 

Sarah Houlton