Five years after spinning off its pharma business, the health solutions giant is focused on the future.
In early 2013, Abbott Laboratories (NYSE: ABT) sent shock waves through the healthcare community by formally spinning off its proprietary pharmaceutical business into a separate new entity, AbbVie (NYSE: ABBV).
The move had a far-reaching impact. At the time, it meant Abbott would lose some of its revenue-generating products, including Humira, a successful drug that treats autoimmune disorders such as rheumatoid arthritis, among others. Five years after the separation, Abbott, which started in the back of a Chicago drugstore 130 years ago, has not spent much time looking in the rearview mirror.
“We’re always focused on the future. And we’re as relevant today as we’ve ever been,” says Miles D. White, Abbott’s chairman and CEO since 1999. “We’ve sharpened our focus and enhanced our leadership positions and opportunities for growth. And importantly, our R&D productivity is at a new high. Over the past several months, we’ve launched a number of products that will increase our competitiveness, open new markets, and contribute in 2018 and beyond.”
For Abbott, that future is about providing life-changing health technologies — from diagnostic instruments to life-sustaining devices to nutrition solutions and medicines for emerging markets — to help people live fuller and healthier lives. And White says two questions guide company strategy: “Where is the greatest opportunity — scientifically and commercially? Where can we have the greatest impact and do the most good?”
A quick look at the firm’s acquisitions and divestitures in 2017 gives some idea of where it sees those opportunities. In early January of last year, the company completed its approximately $25 billion acquisition of cardiovascular device leader St. Jude Medical. The purchase added to its already substantial investment in the medical device sector.
It also brought Abbott a promising new area: neuromodulation to treat chronic pain and movement disorders. The newly acquired electrical stimulation products, many targeting the spinal cord and areas of the brain, have widespread applications, according to Abbott, including some for people suffering chronic pain and movement disorders such as Parkinson’s disease. At the same time, recent research has shown that neuromodulation can reduce or stabilize the use of powerful opioid painkillers.
One month after adding St. Jude, Abbott sold Medical Optics to Johnson & Johnson (NYSE: JNJ). “The business was successful for us — it was innovative, it was profitable,” says White. “But our goal is to be No. 1 or No. 2 in our markets, and we determined that we were not going to be able to broaden our position in that field as we’d once hoped.”
In late 2017, Abbott closed on its approximately $5 billion acquisition of Alere, a point-of-care diagnostics leader that Abbott reports delivers more than one billion test results annually. “Alere strengthens us in one of the few areas in which we weren’t already a leader: rapid diagnostics,” White says.
But research and development are even more important to Abbott than mergers and acquisitions. They are at the core of future growth, says White, pointing to the number of breakthrough home-grown products the company has created and sent to market. He’s especially proud of Abbott’s FreeStyle Libre device, which, he says, allows diabetes patients to test their glucose levels without painful finger sticks and to better manage their treatment of the disease.
In Europe and other countries that recognize CE marking, Abbott reports, it’s rolling out the Alinity suite of four new diagnostic systems to optimize the performance of testing labs. Meanwhile, Abbott says that its nutrition division — which includes product lines like Similac, Pedialyte and Ensure — has unveiled more than 25 significant product launches globally in the last year alone.
Those launches underscore another key strategic focus for Abbott — continued expansion into international markets. The company, which operates in more than 150 countries, is poised to serve a rapidly aging global population and an expanding worldwide middle class with improved access to healthcare. With healthcare spending expected to increase sharply in countries such as India, China, Russia and other emerging markets, Abbott is expanding its distribution networks to meet growing global demand for its medicines, devices, diagnostics and nutritional products.
Assessing Abbott’s current path five years after spinning off AbbVie, White concludes, “We’ve changed, constantly and successfully. That’s the only way to stay relevant and to keep thriving. And that’s exactly what we’re doing.”