Replies to post #128798 on Biotech Values

[DewDiligence]

Musings on ABT’s split-up: After listening to today’s CC, I think the split-up is even dumber than I thought before listening. There will be some ABT drugs where the proprietary pharma successor company will market the drug in the US, Europe, and Japan, while the diversified products successor company will market the same drug in other parts of the world. Seems needlessly inefficient.

Moreover, the proprietary pharma successor company will derive about 50% of its profits from one drug: Humira. It will be the biggest-selling drug in the world (#msg-64677120), but it’s still only one drug, which is an inordinate amount of concentration for a company that is expected to have about $20B in annual sales.

PFE considered—and rejected—exactly this sort of breakup (#msg-64979236), despite intense pressure from investment bankers to do it.

[DewDiligence]

Example of protesting too much, from ABT’s 4Q10 CC:

http://seekingalpha.com/article/248886-abbott-laboratories-ceo-discusses-q4-2010-results-earnings-call-transcript?part=qanda

Jami Rubin (Goldman Sachs): …you didn't talk about the potential to spin-off or sell some of these businesses for which you are not getting any credit for… I mean, that is one strategy that you might want to consider if you think the Street isn't appreciating your non-pharma assets. And I'm wondering if you could just comment on that.

Miles White (CEO): I don't make the strategic decisions for the company based on transactions the Street might like to see.

Miles, you just did.