Abbott plots spinoff of its $18B biopharma business

Abbott Laboratories ($ABT) isn't settling for a mere restructuring. It's going for a full-scale overhaul, splitting itself into two similarly sized, separate companies. Its prescription drugs and biologics business will go off on its own as an $18 billion-in-sales operation, with Abbott's EVP of Global Pharma, Richard Gonzalez, at the helm. The rest--all $22 billion or so of it--will remain under the Abbott name and under CEO Miles White's leadership.

The company says that its biopharma business has a strong mix of products--including the $6.5 billion arthritis and psoriasis treatment Humira--and a strong pipeline. The as-yet unnamed new company will generate most of its sales in developed markets. That might change, however, if the spin-off decides to go after emerging markets sales as other branded drugmakers have. After all, its $1 billion cholesterol drug TriCor goes off patent next year, and that could become a so-called "branded generic" for sale in lower-price markets such as India and China.

Meanwhile, the product mix that remains under the Abbott name generates about 40% of its business in emerging markets, the company said. Part of that is thanks to its generic drugs business. Last year, Abbott bought India-based Piramal's domestic drugs unit and vaulted to the top of that country's pharma industry. Its previous acquisition of Belgium's Solvay Pharmaceuticals also helped to pump up Abbott's emerging markets sales.

The pharma spin-off, expected to wrap up by year's end 2012, will involve issuing new, publicly traded stock in the pharma business to existing Abbott shareholders. The ratio has yet to be determined, and the tax-free status of the distribution has to be confirmed by IRS.

Abbott isn't alone in breaking its healthcare business into smaller pieces. Bristol-Myers Squibb ($BMY) spun off its nutritionals unit to better focus on its core pharma business. Pfizer ($PFE) is in the process of either selling or spinning off its animal health and nutritionals units. With Abbott's stock rising on the announcement, Reuters asks, can other diversified healthcare companies be far behind?

- see the release from Abbott
- read The New York Times story
- get more from Reuters
- check out the Forbes article

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