Filling baby bottles and treating disease... these are the habits of Abbott. Abbott Laboratories is a top health care products manufacturer. Its nutritional products division makes such well-known brands as Similac infant formula and the Ensure line of nutrition supplements, while its drug division sells branded generic medicines (such as antibiotics and gastroenterology medicines) in international markets. The company also makes diagnostic instruments (including tests and assays), vascular medical devices such as its Xience drug-eluting stents, and the FreeStyle diabetes care line, as well as eye care products. Abbott spun off its non-generic pharmaceutical operations into AbbVie in 2013.
Abbott's products are sold in about 150 countries. The company earns about 40% of revenues in the domestic market, with the remainder coming from countries including Japan, the Netherlands, Germany, France, Italy, and Canada. Abbott is working to grow sales in emerging markets such as Brazil, China, India, and Russia.
After more than a year of planning, Abbott separated its medical and pharmaceutical operations in January 2013 by distributing shares of the newly public AbbVie to its shareholders. Flatly put, the split separated Abbott's stable business from its riskier operations -- while the AbbVie pharma operations accounted for roughly 45% of Abbott's revenues, its R&D work was inherently more expensive and riskier, and a number of its commercial products face patent expiration over the next few years.
The Abbott name sticks with the businesses that previously made up its diversified medical products division, including its nutritional, branded generic pharmaceutical, diagnostic, and vascular businesses. Each unit previously accounted for about 10% to 15% of the company's revenues. The nutritionals business and the generic pharmaceuticals business are the two largest operating segments following the AbbVie spinoff.
Drug-coated stent Xience is one of the company's top products and key to its growth initiatives. The vascular segment makes other devices for coronary, endovascular, vessel closure, and structural heart procedures. Meanwhile, the diagnostic segment's products include point-of-care tests, molecular diagnostic products, and information management systems for diagnostic laboratories.
Abbott also makes diabetic testing products through its Abbott Diabetes Care unit, and it makes equipment for cataract and vision correction procedures (including LASIK equipment) through its Abbott Medical Optics subsidiary.
Sales and Marketing
Abbott conducts distribution operations both from its own distribution centers and from third-party distribution partners. Pharmaceutical and nutritional customers include health care organizations, wholesalers, retailers, government agencies, and third-party distribution entities. Diagnostic and vascular products are sold to blood banks, hospitals, physicians, and commercial laboratories.
In the face of multiple challenges, Abbott has remained strong in the global business market in recent years. Revenues increased by 3% to nearly $39 billion in 2012 due to higher sales of nutritional and diagnostic products (as well as the divested proprietary pharmaceutical operations), slightly offset by declines in the established (generic) pharmaceutical and vascular device segments. Abbott's revenue has grown steadily over the past five years.
Abbott accomplished a 26% increase in profits in 2012, after two years of fluctuating net income figures, primarily due to cost-reduction and restructuring initiatives. The company hopes that hiving off future patent expiration losses into the AbbVie spinoff in 2013 will further improve its returns.
Across the years, Abbott has made acquisitions and strategic alliances (in fields including research and marketing) to bolster its offerings and its geographic presence. After swallowing up several businesses, Abbott reshuffled its organization to help it run like the well-oiled giant it is, conducting job cuts and plant consolidations in the US and Europe from 2010 to 2012.
In the R&D realm, Abbott is hard at work on developing next-generation Xience products that include Xience nano, a version of the product for use in small vessels and Xience PRIME, a next-generation version Xience being tested in a range of sizes including small vessel and long lengths. In addition, Abbott has steadily grown its medical device offerings for other therapeutic applications.
Abbott is also widening its offering of clinical diagnostics tools, including the introduction of laboratory software to boost diagnostic data management capabilities.
Product development has also led to new nutritional product launches, such as new Ensure Complete shakes and Perfectly Simple (gluten and preservative-free) ZonePerfect protein bars launched in 2012. To further bolster the nutritional business, Abbott announced plans to build a new manufacturing plant in Ohio in 2012, as well as to establish a nutritional R&D center in India.
Mergers and Acquisitions
In 2010 Abbott moved to bolster its position in the growing field of laboratory informatics by acquiring Tel Aviv-based STARLIMS Technologies, a provider of laboratory information management systems (LIMS), for about $123 million in cash. STARLIMS began buying out some of its longtime distribution partners in 2012 as part of its efforts to expand its LIMS business in Europe and emerging markets in Latin America and Africa.
The company also acquired several pharmaceutical businesses during 2010. Some of these operations were included in the AbbVie spinoff, while others bolstered Abbott's generic drug manufacturing operations.
The company struck two deals in 2013: Abbott purchased IDEV Technologies, a developer of radiology and surgery-related peripheral devices, for some $310 million to grow in the peripheral technology market. It also acquired OptiMedica for some $250 million to enter the laser cataract surgery market.
The spree continued in 2014 when the company doubled its operations in Latin America and upped its commitment to fast-growing markets by paying around $3 million, including debt, for CFR Pharmaceuticals. The Chile-based branded-pharmaceutical maker has manufacturing facilities in Chile, Colombia, Peru, and Argentina.