The diversity doctor, that is.
Anti-inflammatory drug Humira makes up more than 17% of Abbott's sales, and being that dependent on one drug is very unhealthy. Sure, Humira is a biologic, which provides it a little more protection from generics, but sooner or later the drug will face additional competition. So this purchase helps Abbott prepare for that eventuality.
Solvay's pharmaceutical business will add $3 billion in sales to Abbott's $30 billion or so in annual sales and should add immediately to Abbott's earnings after the deal closes next year. Abbott is also picking up a pipeline that includes a drug for battling Parkinson's disease and a flu vaccine technology, and those are bonuses that could make the deal look even better. Of course part of the deal includes $439 million in additional milestone payments, which may be tied to those drugs getting approved.
The purchase has a multibillion-dollar price tag, but it's nowhere near the size of Pfizer's
Investors need to be smart about keeping a balanced portfolio, but they also need to make sure that the companies they invest in aren't taking undue risk by being dependent on just one product. After today's purchase, Abbott is looking a little less risky.