2012 Generics Revenue: $5.1 billion
For Abbott Laboratories, generics is a business abroad. The company markets branded generics outside the U.S., with those sales making up its Established Pharmaceutical Products unit. It is a strategy that is starting to turn in mixed results. Abbott has a strong position in some of the emerging markets that other companies covet, but it is also seeing pricing pressures in Europe that have undercut growth.
The company has built up its portfolio of branded generics over time, reinforcing its own product lineup back in 2001 with the acquisition of Knoll's pharmaceutical business. But it a couple more recent moves really put Abbott on the generics map. For one, its $3.7 billion buyout in 2010 of the domestic unit of India's Piramal Healthcare; with that handshake, Abbott vaulted to No. 1 in India's drug market, picking up about 7% of the Indian drug market as well as the largest sales force in the country. Indian officials weren't so thrilled by Abbott's overnight success, however, nor by the growing number of foreign drugmakers arriving on the scene to grab a piece of India's domestic market. The deal ultimately led to a decision to require governmental approval of foreign investment in domestic pharma companies.
That same year, Abbott bought Belgian company Solvay Pharmaceuticals for $7.6 billion. The deal gave it full custody of cholesterol pill TriCor and solo rights to a follow-up med to Trilipix, along with access to a range of other products. But perhaps most importantly, the Solvay pickup helped Abbott increase its footprint in emerging markets--something the company is still working on. (As for TriCor and Trilipix, they spun off with AbbVie early this year.) In 2010, Abbott licensed 24 products from Indian company Zydus Cadila for 15 high-growth emerging markets, including Russia, India and China, and Abbott continues to focus on those key areas today.
Developed markets, on the other hand, are giving Abbott trouble and dragging down the generics unit's overall performance. Sales in the established pharmaceuticals unit last year dropped to $5.12 billion from $5.36 billion in 2011, in large part because of pricing pressures in Europe. Excluding exchange effects, the company noted, sales increased by 2.1%. Sales were again off in the most recent quarter, however, dropping 2.3% to $1.22 billion. "If there's a weakness in the Abbott story, it's established pharmaceuticals," BMO Capital Markets analyst Joanne Wuensch told Reuters.
But the company is working on improving commercial execution to boost those sales, and not long ago it created two positions devoted to commercial leadership, one focused on developed markets and the other on emerging markets. The company also noted recent tender wins that will help expand its portfolio.
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