A Deep Dive into the Developments at Alere
Multiple government subpoenas
During 2016, Alere (ALR) received multiple government subpoenas, including two criminal subpoenas. In March, Alere received a subpoena from the U.S. Department of Justice (or DOJ) regarding an investigation into the company’s foreign sales and distribution practices in Africa, Asia, and Latin America related to bribery.
In August, Alere received a criminal subpoena from the DOJ related to alleged illegal government billings and payments to doctors at its Austin, Texas, pain management laboratory.
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Medicare reimbursement privileges for a subsidiary revoked
In November, Alere (ALR) lost Medicare reimbursement privileges for its subsidiary, Arriva Medical, its Diabetes division. The company was accused of seeking Medicare reimbursement for 211 deceased people. In 2016, Arriva has generated revenues of $88 million year-to-date.
Permanent device recalls
In July, Alere announced a permanent recall of several devices that were found to generate faulty results. These devices are estimated to have a charge of ~$90 million.
Internal control failures and delayed 10K filings
Alere (ALR) failed to submit its 10K filings on time—they were delayed by five months. Additionally, the company admitted to internal control failures that required the company to restate its 2013–2015 financials.
Abbott Laboratories (ABT) has entered into a number of other deals during the ten months covering the Alere matter. The most notable deal was the $25 billion acquisition of St. Jude Medical (STJ), which was financed through debt. Abbott also sold its Medical Optics division to Johnson & Johnson (JNJ) in September 2016.
Abbott Laboratories is focused on the strategic restructuring of its business while dealing with the acquisition difficulties with Alere. Even if the deal falls through, Abbott expects to recover from any damages it could face. Investors interested in gaining diversified exposure to Abbott Laboratories can consider the iShares Core S&P 500 ETF (IVV).
Next, we’ll look at how the market views Abbott Laboratories’s lawsuit to terminate the acquisition of Alere.