Abbott (NYSE:ABT) offered additional details on its up-coming split, which will result in a new standalone pharmaceutical and biologics arm dubbed AbbVie.
AbbVie’s businesses were worth about $17.4 billion, based on 2011 sales, with a $3.4 billion bottom line. Abbott will retain its medical devices, diagnostics and nutrition units, which accounted for more than $21 billion in sales.
"The separation of our company into 2 distinct investment identities reflects long-term changes in the healthcare market that have led us over time to create distinctly different business models for these 2 businesses," CEO Miles White said in a letter to shareholders. "Both companies will have everything needed to be leaders in their respective industries on day 1 of independent operation."
Miles expects AbbVie to be a higher-margin business with a more intense research focus, while Abbott’s units will have a higher growth rate with more tendrils in emerging markets, White wrote.
The move received a mixed reaction from Wall Street, but has recently gained admiration from prominent analysts who see benefits to smaller, more focused companies in the health space.
Goldman Sachs analysts recently advised new Johnson & Johnson (NYSE:JNJ) CEO Alex Gorsky to think small in planning for the future, suggesting that healthcare goliath J&J may be worth more in pieces than as a whole.
Earlier this month Biomet Inc. announced that it’s exploring strategic options to spin out its 3i dental devices division, although it hadn’t made any final decisions to pursue a split just yet.
Covidien (NYSE:COV) announced late last year that it would spin out its no-growth pharmaceuticals division into a stand-alone business.
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Analysts’ ups and downs
- Becton Dickinson & Co. (NYSE:BDX): Standard & Poor’s raises short-term rating to "A-1+"
- Hill-Rom Holdings (NYSE:HRC): Bank of America raises from "underperform" to "neutral," lowers price target from $24 to $23 on declining growth
- Hologic (NSDQ:HOLX): Standard & Poor’s maintains "BB" rating on Gen-Probe acquisition news
- Johnson & Johnson (NYSE:JNJ): JP Morgan raises from "neutral" to "overweight" rating, increases price target from $69 to $74; Leerink Swann maintains "outperform" rating; Jeffries upgrades from "hold" to "buy" rating, raises price target from $68 to $72
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- St. Jude Medical (NYSE:STJ): Morgan Stanley maintains "overweight" rating
