Biotech Values

[DewDiligence]

Further comments on ABT-EXAS deal:

On today’s CC, ABT’s CEO acknowledged that there are no major cost synergies in the EXAS deal, which is surprisingly honest. (Almost all M&A deals come with optimistic projections for cost synergies.) The reason ABT can say that EXAS will be accretive to EPS in 2028 is the operating leverage that comes from an increased volume of tests.

Moreover, ABT has a conservative balance sheet, so more financial leverage can help boost EPS without lowering ABT’s credit rating. The hurdle to boost EPS is pretty low with the interest rates ABT can expect to pay on newly issued debt to fund the acquisition.