"Established products," as Abbott calls them, is a euphemism for "old and un-patentable drugs" that the company is still trying to sell, often overseas. Pfizer
There's plenty of growth available overseas and squeezing out profits is better than letting the drugs die, but I'm not sure the profit margins should get investors excited. Abbott says that 20% of its pharmaceutical sales come from emerging markets, but the real question is how much of its profits come from those areas. I'm willing to bet it's considerably less.
The reason drugmakers can throw off so much cash is because of their high margins. If they're going to enter a lower-margin business, they better do it right, and go all in. The way to compensate for lower margins is with monster sales; dabbling isn't going to cut it.
Abbott started the process with its acquisition of Knoll's pharmaceuticals business and more recently with the acquisition of Solvay Pharmaceuticals. But investors should look for more moves into emerging markets -- either internally or through acquisitions -- before the strategy starts contributing considerably to the bottom line.
Fool Tim Hanson thinks your portfolio needs to take a vacation to far-away markets.
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