St. Jude Medical acquisition
On January 4, 2017, Abbott Laboratories (ABT) announced the completion of its acquisition of St. Jude Medical. The deal is expected to catapult Abbott to a dominant position in all areas of the cardiovascular device market, currently valued at ~$30 billion.
St. Jude Medical has added a strong portfolio that consists of devices required for treating atrial fibrillation, structural heart issues, chronic pain, and heart failure that complement Abbott Laboratories’ portfolio in the coronary intervention and mitral valve disease areas. To know more about the deal’s synergies, read Rationale for the St. Jude Medical-Abbott Merger Transaction.
In 1Q17, Abbott Laboratories divested St. Jude Medical’s vascular closure business as well as its medical optics business. Besides generating excess funds, these divestitures have also helped Abbott to reduce antitrust issues related to the deal.
In the event the acquisition of St. Jude Medical manages to position Abbott Laboratories as a leader in the medical device space, its stock price may see a boost, as could the price of the SPDR S&P Dividend ETF (SDY). Abbott Laboratories makes up ~0.98% of SDY’s total portfolio holdings.
The above diagram shows the position of Abbott Laboratories in various areas of the cardiovascular segment after its complete integration of St. Jude Medical. This strategic acquisition is expected to enable Abbott Laboratories to pose strong competition to other medical device players such as Medtronic (MDT), Thermo Fisher Scientific (TMO), and Boston Scientific (BSX).
FDA warning letter
On April 12, 2017, the FDA issued a warning letter to Abbott Laboratories related to its adulteration of Unify Fortify, Assura implantable cardioverter defibrillators, Merlin@home Transmitters, and cardiac resynchronization therapy defibrillators at St. Jude’s Sylmar facility in California. Since Abbott is well-versed in the requirements of good manufacturing practices, the company is confident that it can remedy these issues.
In the next article, we’ll discuss growth prospects for Abbott Laboratories’ Nutritional segment in greater detail.