ABBOTT A Promise for Life Investment Managers: Jonathan Barki Su Chen Lele Liang (Layla) Nan Liang...
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Transcript of ABBOTT A Promise for Life Investment Managers: Jonathan Barki Su Chen Lele Liang (Layla) Nan Liang...
ABBOTTA Promise for Life
Investment Managers:
Jonathan Barki
Su Chen
Lele Liang (Layla)
Nan Liang
Ran Mu (Renee)
Presented: November 3, 2011
ABBOTTA Promise for Life
Transaction HistoryBought 200 shares at $52.05 on April 28, 2011
Current Price: $52.88 (as of Nov 2)Unrealized gain of $166, 1.59% (as of Nov 2)
ABBOTTA Promise for Life
MacroeconomicsDefensive / recession-proof Healthcare sector
Change in consumers’ behavior – postpone healthcare
Source: Capital IQ
ABBOTTA Promise for Life
Healthcare ReformPharmaceutical firms set aside $80 billion over the next 10 years to reduce drug costs
Challenged to finance the initial costs of drug reform
12 year exclusivity period on biologics before they face competition from generic alternatives
Tax credit for small biotech companiesNo government intervention
News Source: http://www.rsc.org/chemistryworld/News/2010/March/25031003.asp
ABBOTTA Promise for Life
Global Demographics
Source: Google data
ABBOTTA Promise for Life
Global Consumption Power
ABBOTTA Promise for Life
Stock Performance
Source: Capital IQ
ABBOTTA Promise for Life
Industry Current RevenueUS and Europe markets: growth slows down
Emerging markets: robust growth
Source: IBIS World, April 18, 2011, P54
ABBOTTA Promise for Life
Industry Revenue Outlook
Source: IBIS World, April 18, 2011, P56
ABBOTTA Promise for Life
Industry Characteristics
Source: IBIS World, April 18, 2011, P10
ABBOTTA Promise for Life
Industry Main Players
Source: IBIS World, April 18, 2011, P34
ABBOTTA Promise for Life
Industry Cost Structure
Source: IBIS World, April 18, 2011, P25
ABBOTTA Promise for Life
Industry Key FactorsKey sensitivities: Population age, Systems and tech, attitudinal change and regulation
Key success factors: Brand names, tech sharing arrangements, R&D, product development and financing arrangement
Hold-back factors: Patent expirations, competition, a depleted product pipeline, regulatory, price pressures and deteriorating public opinionSource: IBIS
World, April 18, 2011, P32
New DrugNew Chemical Entity: with patent– monopoly high risk- time: 10-15 year- money: $800million- $1billion- probability of success: 1 out of 5,000 to 10,000
high returnGeneric Drug: no patent– competition
low risklow return
ABBOTTA Promise for Life
Source: Drug Discovery and Development, innovation.org
Drug Pipelines- New entity
In
MarketDrug
Discovery
Pre-
clinical
Testing
Post-
marketing
Testing
FDA
Review &
Approval
Clinical
Trials
Phase I
Clinical
Trials
Phase II
Clinical
Trials
Phase III
In lab: 3-6 years
In hospital: 6-7 years
0.5-2 years
1-2 years
5,000-10,000 250 5 1
# enter into stage
ABBOTTA Promise for Life
Current AbbottPharmaceuticalsNutritional ProductsDiagnostic Products Vascular Products Others
ABBOTTA Promise for Life
Pharmaceuticals- diseasesNeurological disease
-Alzheimer, ParkinsonImmunology
-Crohn’s diseaseOncology
-cancerKidney DiseasePain
ABBOTTA Promise for Life
Source: Abbott Investor Day 2011
Chronic diseases persistent demand
Complex diseases high price
Pharmaceuticals- diseasesNeurological disease
-Alzheimer, ParkinsonImmunology
-Crohn’s diseaseOncology
-cancerKidney DiseasePain
ABBOTTA Promise for Life
Pharmaceuticals- ProductsMain Brands:
ABBOTTA Promise for Life
Pharmaceuticals- ProductsMain Brands:
HUMIRA (48%)-Crohn’s disease
TriCor/Trilipix (10%)- Lipid disorders
ABBOTTA Promise for Life
Source: Abbott Investor Day 2011
Current Abbott- ReviewAccording to sale
Pharmaceuticals
Nutritional Products
Diagnostic Products Vascular Products
Brand Drugs
Generic Drugs
HUMIRA
Generic Drugs I
Generic Drugs II
Other Branded Drugs
Nutritional Products
Diagnostic Products Vascular Products
Nutritional Products
Diagnostic Products Vascular Products
ABBOTTA Promise for Life
Spin off – End of 2012 According to sale
Pharmaceuticals
Nutritional Products
Diagnostic Products Vascular Products
Brand Drugs
Generic Drugs
HUMIRA
Generic Drugs I
Generic Drugs II
Other Branded Drugs
Nutritional Products
Diagnostic Products Vascular Products
Nutritional Products
Diagnostic Products Vascular Products
ABBOTTA Promise for Life
After Spin Off
Generic Drugs I
Generic Drugs II
HUMIRA
Other Branded Drugs
Nutritional Products
Diagnostic Products Vascular Products
Current Abbott
New Abbott: Diversified Medical
Products
New Pharmaceutical Company
ABBOTTA Promise for Life
Old Brands with Patents (87%)5 main brands
Generic Drugs (13%)Potential New Drugs
ABBOTTA Promise for Life
New Pharma. Company-Old Brands
New Pharma. Company-Old Brands
Patent Expires!!
ABBOTTA Promise for Life
ABBOTTA Promise for Life
New Pharma. Company- R & D Bran
Source: Abbott Investor Day 2011
In the short future:2014Bardoxolone: 7 billion
After next 10 years32 drugs in clinical phase I-IIIE(succeeded new brands)=6
ABBOTTA Promise for Life
New Pharma. Company- R & D Bran
ABBOTTA Promise for Life
Key Developments
Source: Abbott Investor Day 2011
Strategic RationaleABBOTTA Promise for Life
Source: Abbott Investor Day 2011
Product Segments
ABBOTTA Promise for Life
Source: Abbott Investor Day 2011
Geographic Expansion
ABBOTTA Promise for Life
Source: Abbott Investor Day 2011
Established PharmaceuticalsOver 500 branded generic products in portfolio
“Driving efficiencies without compromising quality”
Various structural changesHundreds of new products in the pipeline
Even split between Developed and Emerging Markets
ABBOTTA Promise for Life
Source: Abbott Investor Day 2011
Medical Devices
Vascular DevicesFor heart diseases#1 in many facetsOver 20 new products in pipeline
Diabetes CareFastest growing in insulin-dependent patients in the US
Vision Care
ABBOTTA Promise for Life
Source: Abbott Investor Day 2011
Diagnostic Products Core Laboratory Diagnostics
#1 in immunoassay#1 in blood screeningOver 69,000 customers
Molecular DiagnosticsHIV testsPioneering the development of bio-identification with Plex-ID
Point of Care DiagnosticsMarket leader in bedside testing
ABBOTTA Promise for Life
Source: Abbott Investor Day 2011
Nutritional ProductsPediatric Nutritionals54% of sales#1 in the US
Adult Nutritionals 46% of sales#1 worldwide
ABBOTTA Promise for Life
Source: Abbott Investor Day 2011
Financial Analysis
Source: Capital IQ
ABBOTTA Promise for Life
Return on Invested Capital
Source: Capital IQ
ABBOTTA Promise for Life
ABBOTTA Promise for Life
Dupont Analysis
Multiple Analysis 1-Current ABT
Johnson & Johnson: Pharmaceutical, Consumer, and Medical Devices and Diagnostics.
Sanofi: Pharmaceutical, Vaccines and Diagnostics, Animal Health.
Novartis AG: Pharmaceuticals, Vaccines and Diagnostics, Sandoz division, and Consumer Health.
Pfizer Inc: Pharmaceutical, Animal health products, Consumer healthcare products, and Nutrition products.
Merck & Co: Pharmaceutical, Vaccines, Biologic therapies, Animal Health, and Consumer Care Products.
ABBOTTA Promise for Life
Comparables Valuation 1 Company Forward P/E Price/Sale Price/Book
JNJ 12.88 2.74 2.96
SAN 7.58 2.72 1.27
NOVN 10.56 2.43 2.00
PFE 8.59 7.80 1.70
MRK 9.15 3.27 1.92
ABT 10.62 1.56 3.30
High 65.33 185.49 55.94
low 38.45 37.01 21.53
Mean 50.20 81.30 37.15
Price 1 56.22
ABBOTTA Promise for Life
Multiple Analysis 2-After Split
New Pharmacy Pfizer Inc (PFE) Merck & Co. Inc (MRK) Eli Lilly & Co (LLY) GlaxoSmithKline PLC (GSK)
New ABTGlobal Nutrition 30%
GNC Holding Inc. (GNC) Amway Malaysia Holdings Bhd (KLSE:AMWAY) Vitamin Shoppe (VSI)
Diagnostics 22% Quest Diagnostics and Laboratory (DGX) Bio-Reference Laboratories Inc. (BRLI) Laboratory Corp. of America Holdings (LH)
Medical 18% Vascular Solutions Inc. (VASC) Boston Scientific (BSX) Merit Medical Systems, Inc (MMSI)
Established Pharma 28% Mylan, Inc. (MYL) Watson Pharmaceuticals, Inc. (WPI)
ABBOTTA Promise for Life
Comparables Valuation 2ABBOTT
TEV1 27,626,582.61
TEV2 48,653,375.84
Total EV 76,279,958.46
-debt 12,523,517.00
+Cash 3,648,371.00
Equity Value 67,404,812.46
# of shares 1,550,000.00
Price 43.49
ABBOTTA Promise for Life
ABBOTTA Promise for Life
Valuation
DCF: $69.09
Comps 1: $56.22
Final Valuation: $65.24
80% 10%
Comps 2: $43.49
10%
ABBOTTA Promise for Life
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