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AbbVie gains its independence

by Jonathan Marino  |  Published January 2, 2013 at 3:45 PM
Pills-227x128.jpgAfter a year of waiting, AbbVie  Inc. is finally on its own.

Abbott Laboratories on Wednesday, Jan. 2, completed its long-awaited, multibillion-dollar separation into two companies, establishing the creation of North Chicago, Ill.-based AbbVie, the former healthcare conglomerate's research-based pharmaceutical business. Abbott's larger, diversified medical products business will continue on under the Abbott name. (see video interview with AbbVie's CFO Bill Chase below)

"Abbott has taken the most transformative action in its 125-year history," Abbott CEO Miles White said in a statement. "We have had enduring success precisely because of what we're doing now -- reinventing ourselves for changing times and creating new ways to serve the millions of patients, customers, communities and shareholders who depend on us."

Abbott's stock began trading on the New York Stock Exchange under the symbol ABBV on Wednesday, just a day after Abbott doled out a special dividend to its shareholders. As part of that split, each Abbott stockholder received one AbbVie share for each Abbott share already owned. AbbVie didn't issue any fractional shares, but instead handed cash to shareholders for each fractional share they owned.

AbbVie's stock began trading at $34.16 per share and trended up slightly on Wednesday, trading at $34.31 during the middle of the day. Abbott's stock jumped to $32.44 per share from a $31.34 per share open. In its last day of trading as a combined company, Abbott's stock was worth $65.50 per share. Shares traded at roughly $50 apiece when Abbott first announced plans to split in two in October 2011. Both companies now have a market capitalization of roughly $50 billion. AbbVie had about $17 billion in sales in 2011.

Richard A. Gonzalez is AbbVie's chairman and CEO. William Chase, previously Abbott's vice president of licensing and acquisitions, is AbbVie's chief financial officer. Both were part of a team of AbbVie representatives that helped ring the opening bell at the NYSE on Wednesday morning.

Abbott Park, Ill.-based Abbott doesn't own any piece of AbbVie. The two severed ties through the largest-ever dollar-denominated debt issuance in the U.S. high-grade market. On Nov. 6, AbbVie launched a $14.7 billion debt offering to help finance the split.

AbbVie has said it will use about $8.5 billion of that debt to make a cash payment to Abbott, which will, in turn, use the funds to pay down debt. White said when the split was announced that the move was about establishing two clear identities for each business.

AbbVie, often mentioned by analysts as a potential takeover target, will now face the challenge of both extending the life of Humira -- the wildly successful biologic drug for rheumatoid arthritis, Crohn's disease and several other indications that is expected to have brought in about $9 billion in 2012 -- as well as supplementing that flagship medication with other powerhouse franchises when its patent life runs out.

AbbVie has made a number of strides in that regard over the past few years both through internal drug development and licensing and collaboration deals. AbbVie, for example, is considered second to only Gilead Sciences Inc. in the race to create an all-oral treatment regimen for hepatitis C, a new wave of treatments for the deadly disorder that will ultimately replace current interferon-based therapies. Its laboratories have also worked to create a pipeline of drugs for renal disorders and recently established a significant financial partnership with Seattle Genetics Inc. regarding antibody drug conjugates, or ADCs, a next-generation group of cancer drugs that is one of the hottest fields in the pharmaceutical sector.

AbbVie's hope is that such prospective drugs will ultimately lessen its dependence on Humira, which is already beginning to face competition. Pfizer Inc., for example, won Food and Drug Administration approval last month for Xeljanz, the first in a new group of oral treatments for rheumatoid arthritis that may grab market share from AbbVie's megablockbuster.

"Today, AbbVie launches with an outstanding portfolio, a solid pipeline and enthusiastic people who will serve patients and growth," Gonzalez said in a statement. "With those assets and a relentless focus on innovation we intend to create significant value for our shareholders."

Tags: Abbott Labs | Abbvie | Bill Chase | healthcare | M&A | pharmaceuticals | spinout

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