Biotech Values

[DewDiligence]

ABT—Analysts are starting to conduct valuation arithmetic on the planned split-up; as conjectured in #msg-68125025, the pharma successor company (AbVie) will likely receive a lower P/E ratio than the diversified products successor company (Abbott):

http://online.barrons.com/article/SB50001424053111903715504577309582498394516.html

JPMorgan Chase analyst Michael Weinstein last week valued the two parts at around $60 a share. That reflects an anticipated price of $34, or 10 times estimated 2012 profit for AbbVie, and $26 for new Abbott, or 14 times earnings. Abbott is likely to be more richly valued than AbbVie because of expectations of double-digit annual profit growth from its diversified portfolio [i.e. it doesn’t have to contend with patent expirations on branded drugs].

Barbara Ryan of Deutsche Bank has a more bullish target of $70, based on higher estimated values for the two parts. She and others see the pharmaceutical division anchored by a high dividend that could top 4%. Abbott now pays a 3.3% dividend, and the two new companies plan to pay out a like amount, with the new Abbott expected to yield about 2%.