Update Abbott Laboratories (ABT)

Got any place better to park your money for 14 months?

That’s the question that Abbott Laboratories’ (ABT) plan to split into two companies poses for investors who own the stock. (Abbott Laboratories is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/ )

The plan, announced on October 19, envisions splitting Abbott into two companies with the split up to be complete by December 2012.

One, with $18 billion in sales, would be a focused drug company with ownership of the current Abbott blockbuster Humira. That drug for rheumatoid arthritis is projected to account for $8 billion in sales in 2011. That would be more than 40% of the sales of the new drug company after the split up.

The second, with $22 billion in sales, has been described in most stories as a medical device and diagnostics company. That’s rather misleading. This post split-up company would actually get the biggest part of its sales from nutritionals—28% to the 27% of sales from medical devices. Nutritionals for infants and adults is, I argued when I added the stock to Jubak’s Picks in September 2010, the jewel among Abbott’s units. The business is growing at double-digit rates and expanding margins at the same time—Abbott projects that operating margins for nutritionals will expand by a full 7 percentage points from current levels by 2015.

Not that the rest of the device/diagnostics/nutritionals company is made up of dogs, either. Read more

You can certainly find stocks with a higher dividend yield than the 3.4% that Abbott Laboratories (ABT) paid when I added it to my dividend income portfolio http://jubakam.com/portfolios/ on May 6. (It closed that day at $52.52) But I think you’ll be hard pressed to find a stock paying that much that has the same potential for very safe and steady growth. (See my post http://jubakpicks.com/2011/05/06/do-dividends-suddenly-seem-attractive-as-the-market-tumbles-where-ya-been-all-my-life-check-out-the-latest-update-to-my-dividend-income-portfolio/ for my latest update of that portfolio.)

Abbott Laboratories is among the most balanced of the big U.S. drug companies. Read more

Update Teva Pharmaceuticals (TEVA)

All it took on December 9 to pop shares of Teva Pharmaceutical Industries (TEVA) was good news on the Phase III study on oral laquinimod for multiple sclerosis. The two-year study found that patients experienced a statistically significant reduction in relapse rate and a significant reduction in the progression of the disease. Additional results of the study will be released by Teva and its partner Active Biotech (ATVBF).

Shares of Teva finished December 9 up 6.8%. Shares of Active Biotech were up almost 80% on the day.

Laquinimod received Fast Track designation from the U.S. Food and Drug Administration in February 2009. A second Phase III trial is still in progress with results anticipated in the third quarter of 2011. The companies expect to submit the drug to regulators in the United States and the Europe Union shortly after that. Teva, the world’s largest maker of generic drugs, submitted a patent application for laquinimod after the test results were released.

Needless to say the successful development of laquinimod would be a huge boost for Teva’s ambitions to become a developer of new drugs as well as the leading generic drug company. Read more

Buy Abbott Laboratories (ABT)

At current prices I think you’re getting two of Abbott Laboratories (ABT) most interesting growth opportunities at a deep discount.

Abbott is a good mainstream pharmaceutical company. Abbott’s blockbuster drugs include Humira (for rheumatoid and psoriatic arthritis: $5.5 billion in 2009 sales), Kaletra (for HIV/AIDS: $1.4 billion in 2009 sales), the TriCor/Triplex combination (for cholesterol and cardiovascular disease: $1.3 billion in 2009 sales) and Lupron (for prostate cancer: $800 million in 2009 sales) The patent on Humira doesn’t expire until 2016. Pharmaceuticals accounted for 53% of operating revenue in 2008.

Abbott’s vascular products unit—9% of operating revenue—is on a new product roll with the release of its new Xience drug-coated stent. Launched in 2008, Xience is the market’s leading drug-coated stent in the U.S. market for coronary and carotid stent.

My guess, though, is that most investors aren’t as familiar with Abbott’s nutritional and emerging market/generic businesses. And I don’t think the current stock price fully reflects the growth prospects in those areas of the company.

Nutritionals made up about 17% of Abbott’s sales in 2009. Products include infant formula (Similac and Isomil are the brands) and adult nutritionals (Ensure and Prosure.) This business segment grew revenue by 7.3% from 2008 to 2009 and I think growth could actually accelerate. Rising income levels are driving sales of infant and adult nutritionals in emerging markets and Abbott has been increasing its penetration, especially in China, South East Asia, and Latin American through moves like the 2009 acquisition of the nutritional business of India’s Wickhardt Ltd.

The other unrecognized part of Abbott’s business is epitomized by its acquisition of Solvay Pharmaceuticals Read more

Update Teva Pharmaceutical Industries (TEVA)

It’s great earnings for the second quarter (announced on July 27) versus long-term worries for Teva Pharmaceutical Industries (TEVA) right now. With an assist from sell on the good news, long-term worries are winning at the moment.

For the second quarter earnings climbed to $1.08 a share. That was an increase of 30% from the 83 cents a share in the second quarter of 2009. The Wall Street consensus had projected earnings of $1.04. 

In its conference call the company raised its guidance for the year to $4.50 to $4.60 a share, up from the prior forecast of $4.40 to $4.60.

Oddly enough for the world’s largest maker of generic drugs, the long-term worries focus on a proprietary Teva drug, Copaxone. Read more