Abbott Laboratories' ($ABT) contract manufacturing organization (CMO) generated nearly $425 million in revenue last year, putting it on footing with other sizable CMOs.
The contract manufacturing piece of the business will be part of the spinoff AbbVie when the company divides this year, reports Outsourcing-Pharma. AbbVie will be pharma- and biologics-focused while Abbott Labs will retain the medical device and diagnostics part of the business. The CMO gets a jump-start with the work it will keep from Abbott, which will retain the generics drug business.
"AbbVie will enter into one or more manufacturing and supply agreements with Abbott prior to the distribution pursuant to which AbbVie or Abbott, as the case may be, will manufacture, label, and package products for the other party," according to the financial filing for the spinoff. Those arrangements, which it says will be last up to 5 years, will be negotiated at arm's length, the filing says.
While revenue generated by contract manufacturing has traditionally been lumped with other areas, a hint of its level is indicated in the SEC document, Outsourcing-Pharma says. It estimates that the CMO produced about $112 million in revenue in the first quarter of 2012 and $422 million in its last fiscal year. It compares that to CMO Patheon ($PTI), which had first quarter revenue of $123 million and full-year revenue of $573 million, when you exclude its development services revenue.
The split is to address Wall Street's preference for pure-play pharma companies, whose revenues and growth are easier to predict and track. But you still have to have someone to manufacture the drugs, and keeping the CMO business will allow AbbVie to maintain control of that.