Abbott on Acquisition Spree – Analyst Blog

Abbott (ABT) continues to be in an acquisition mode, recently announcing its intention to acquire Facet Biotech Corporation (FACT) for $27 per share. The total purchase price is approximately $722 million, including Facet’s projected cash and marketable securities of approximately $272 million.

 

Last year, Facet rejected an offer from Biogen Idec Inc. (BIIB) on the ground that it was inadequate and not in the best interests of Facet’s stockholders. Abbott’s offer price of $27 is well above Biogen’s last offer of $17.50 and represents a 67% premium to Facet’s closing price on March 9, 2010. Facet shares were up 67.2% in after market trading.

 

The acquisition of Facet should help enhance Abbott’s early and mid-stage immunology and oncology pipeline. Facet’s daclizumab, which is being developed in collaboration with Biogen is being studied for the treatment of multiple sclerosis. The compound is slated to move into phase III development in the second quarter of 2010.

 

Besides daclizumab, Facet has several compounds in its oncology pipeline that are being developed for different types of cancer, including multiple myeloma and chronic lymphocytic leukemia.

 

Under the terms of the definitive agreement between the companies, Abbott will commence a tender offer to purchase all outstanding shares of Facet. The acquisition is scheduled to close in the second quarter of 2010.

 

Although Abbott will be incurring one-time charges related to the acquisition, the company did not make any changes to its previously announced earnings guidance. Abbott expects earnings in the range of $4.20 to $4.25 on strong double-digit revenue growth in 2010.

 

The Facet acquisition is the latest in a series of deals executed by Abbott to strengthen its pipeline. Earlier this year, Abbott signed an exclusive worldwide licensing agreement with Pierre Fabre SA for the development and commercialization of a cancer compound, h224G11. Abbott also completed its acquisition of the pharmaceuticals business of Belgian company Solvay Group earlier this year.

 

Last year, Abbott acquired Advanced Medical Optics. Besides this, the company also acquired eye care companies Visiogen and Evalve Inc., which focus on the development of devices for minimally invasive repair of cardiac mitral valves. Abbott also acquired global rights to a pain drug in 2009.

 

With these deals, we believe Abbott is looking to diversify its product portfolio so that it can reduce its dependence on Humira, which contributed $5.5 billion to sales in 2009. We currently have a Neutral recommendation on Abbott.