Healthy Skepticism Library item: 7363

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Publication type: news

Hwa-shu L.
The top business story of 2006 Abbott's bold acquisitions Blockbuster $3.7 billion deal lands Kos Pharmaceuticals
Lake County News-Sun (Chicago) 2007 Jan 1
http://www.suburbanchicagonews.com/newssun/business/192988,5_3_WA01_KOS_S1.article

Full text:

In a bold but visionary move, Abbott Laboratories announced in early November the $3.7 billion acquisition of Kos Pharmaceuticals, or $78 per share — far above Kos’ average share price.

In fact, on the Friday before Abbott made the announcement about the buyout on Monday, Nov. 6, Kos’ stock closed at $50.09.

The acquisition was the top business story in Lake County for 2006.

The obvious question on investors’ minds was: Did Abbott pay too dearly for the deal?

Abbott, no doubt, is looking beyond and hopes it will eventually recoup the investment and make a good profit in the future.

The acquisition paves the way for Abbott to be on the ground floor of the estimated $20 billion cholesterol control market which is growing by leaps and bounds not only in the United States but around the world. Kos already has several such drugs on the market and others in its pipeline. One of those on the market is Niaspan, which raises good cholesterol. Abbott has long marketed its TriCor, which also raises good cholesterol, and is working on TriCor’s next- generation replacement.

Pfizer, the world’s largest drug company, recently announced the withdrawal of its once-promising Tocetrapib from final clinical trials because of safety concerns. Ironically, while the drug is supposed to fight cholesterol, it also raises blood pressure. Pfizer had pinned high hopes on Torcetrapib, a potential blockbuster until the change of heart.

Pfizer’s loss could very well be Abbott’s gain in the cut-throat competition in the drug industry.

“This news (Pfizer’s withdrawal) confirms that there’s still a great patient need of effective medicines to treat lipid disorders,” said Abbott spokesman Jonathan Hamilton.

“Abbott’s acquisition of Kos, in addition to our own on-market and pipeline products, will enable the company to provide patients with improved therapies based on medicines they trust,” he added.

In addition to access to cholesterol drugs, the acquisition comes with asthma and diabetic therapies that are in late-stage development.

Abbott, in making the tender offer to Kos shareholders, acquired a total of 34.9 million shares or 91.4 percent of Kos’ outstanding common shares. Owners of the remaining shares will receive the same $78 cash offer, the company said.

The acquisition came on the heels of Abbott’s $4.1 billion buyout of Guidant Corp.‘s coated-stent business from Boston Scientific. With that purchase, Abbott intends to be a major player in the $5 billion stent market. How this buyout will turn out remains to be seen in light of recent growing concern regarding the safety of stents, which have been blamed, in certain cases, for incidents of heart attack.

But Abbott’s $6.9 billion purchase of Knoll Pharmaceuticals in 2001 has proven to be a huge success. Humira, the rheumatoid arthritis drug, which came with it, is already a blockbuster with this year’s sales expected to reach beyond the $1 billion mark.

Abbott naturally would like to duplicate that success with this year’s two acquisitions.