NEW YORK ― Abbott Laboratories Inc. said it will split into two publicly traded companies — one focusing on pharmaceuticals and biotech medicines and the other on medical devices, diagnostics, nutritionals and generic medicines — to better ensure growth.
Its shares jumped 7.3 percent in premarket trading on Wednesday after the announcement, which may increase pressure on other diversified healthcare companies to examine potential break ups.
The company also reported a 66 percent drop in third-quarter net profit, due to a $1.4 billion after-tax litigation charge. The charge relates to the company’s attempts to settle a U.S. federal investigation into marketing of its Depakote anticonvulsant drug. Excluding the charge, third-quarter results slightly topped Wall Street forecasts.
Chief Executive Officer Miles White, who has led the suburban Chicago company since 1998, will be in charge of the diversified medical products company, which will retain the Abbott name.
Richard Gonzalez, currently Abbott’s executive vice president of global pharmaceuticals, will lead the other company. Gonzalez, who first joined Abbott in 1977, previously served as the company’s president and chief operating officer.
The new pharmaceutical company, yet to be named, will be created from a tax-free distribution to Abbott shareholders, although the expected stock distribution ratio has yet to be set.
The new pharmaceutical company would have nearly $18 billion in annual revenue and will include Abbott’s current flagship product, the rheumatoid arthritis drug Humira, one of the world’s top-selling medicines at more than $8 billion a year.
The diversified medical products company has about $22 billion in annual revenue and includes its market-leading Xience heart stent. This company will target double-digit ongoing earnings-per-share growth, while looking to expand in emerging markets, the company said.
It is expected that the two companies will each pay a dividend that, when combined, will be equivalent the current Abbott dividend at the time of separation. The company expects to complete the split by the end of 2012.
Also on Wednesday, Abbott reported that net earnings dropped to $303 million, or 19 cents per share, dragged down by the Depakote charge. That compared with $891 million, or 57 cents per share, a year ago.
Excluding special items, Abbott earned $1.18 per share, a penny ahead of the average expectation of analysts, according to Thomson Reuters I/B/E/S.
Global sales rose 13 percent to $9.82 billion, above Wall Street expectations of $9.64 billion.