In the decade that Miles White has headed Abbott Laboratories, the healthcare and pharmaceuticals giant has done more than $30 billion worth of deals, greatly expanding its offering of drugs, nutritional products, medical devices and diagnostic equipment.
But what may be surprising is that Abbott made fully a third of those acquisitions in 2009 -- a year when economic dislocation paralyzed many dealmakers, especially in the early months.
Not Abbott, though.
In January, after several years of studying the ophthalmic-care market, the company made its first foray into the field with a $2.8 billion takeover of Santa Ana, Calif.-based Advanced Medical Optics Inc., a leader in cataract surgery, laser vision correction and eye-care products.
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The deal was classic Abbott, and an indication of why the company took top honors in pharma-biotech for the second straight year in The Deal's Most Admired Corporate Dealmakers survey.
"This was a field where we needed a platform," says Murphy. As AMO's two big competitors changed hands -- Bausch & Lomb Inc. was sold two years ago to private equity firm Warburg Pincus, while Novartis AG bought a controlling share in Alcon Inc. from Nestlé SA for about $39 billion in 2008 -- the best fit became apparent. "We zeroed in on AMO as the other two went through their own transactions," Murphy says.
Analyst Phillip Nalbone of Wedbush Morgan Securities Inc. credits Abbott with being neither too early nor too late.
On one hand, he says, "they were biding their time and waiting for a good piece of real estate." But Abbott has also avoided the mistakes of medical-technology competitors that have bought companies with lead products that are mature -- "like buying the home run king with bad knees and declining eyesight," Nalbone says. "Abbott has been much more successful. They tend to acquire things a little bit before their big takeoff."
Abbott now has its platform, overseen by Jim Mazzo, who had been chairman and chief executive officer of AMO. Renamed Abbott Medical Optics and part of Abbott's medical devices division, AMO says it is first in the Lasik market, second in cataract surgeries and third in eye-care products.
In September, Abbott added to the ophthalmic platform with the $400 million purchase in September of Visiogen Inc., another California firm. Visiogen has developed an advanced lens for cataract patients that is already being sold to European patients and is pending approval for use in the United States.
Those two deals alone would have represented a productive year for many business development teams, but Abbott was active on multiple fronts.
Also in September, Abbott prevailed in the auction for the drug business of Brussels-based Solvay SA, buying Solvay Pharmaceuticals Inc. and its array of therapeutic products for $6.6 billion.
Along with Solvay, its biggest purchase, there were a half dozen other transactions as well as numerous licensing deals for developmental drugs and other products.
Abbott bought the nutrition businesses of Wockhardt Ltd. of India for $130 million, paid $410 million for Evalve Inc. and its cardiac valve repair technology and up to $190 million to the Dutch firm PanGenetics BV for a developmental drug to treat chronic pain.
Murphy, 57, and a 30-year Abbott veteran, says the company's dealmaking considerations all start with the business strategy. The goal is to accelerate and broaden the business, and ultimately to win the marketplace. "When it comes to market analysis," he says, "we're very careful and diligent."
He estimates that he and his 45-member staff look at 2,000 leads for acquisitions or licensing deals in a year. Only one or two out of 100 warrant a closer look, though.
"We've refined and honed it over the years," he says.
In the end, Murphy says, acquisitions are "all about confidence in the future."
In Abbott's case, that's around $10 billion worth of confidence in just the past year.
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Comments
As one of the originators of both LASIK and the Intralase worldwide, my perspective is that the VISX laser platform which is the corrective laser component and the Intralase, which is the femtosecond laser component, are both mature products with little room for further growth. The impact of this will be seen when Alcon who is rapidly gaining market share with their Wavelight platform introduces an improved femtosecond platform early next year. Many providers have moved away from the Visx laser and this will put increasing pressure on Abbott in the refractive market place over the next few years. Zeiss also has introduced very competitive products in the refractive cornea space. >DishlerLaserInstitute