For a long term investor, the recent poor performance by Abbott relative to its peers should be considered as a temporary set back. For a short term players, it is prudent to take a closer look at Abbott. Its two major drugs, Hytrin and Erythromycin will be out of patent protection in less than three years, Erythromycin now has a strong competitor from Pfizer--I personally have taken both antibiotics, the side effects of Erythromycin makes its lesser attractive of the two when both are effective against bacterial infections. Pfizer's drug is also cheaper--reimbursment issue here. The drug pipeline at Abbott is very week, the so-called Frog poison is a joke, people know the area well will tell you that it is not only far away from entering the US market, it is also facing formidable challenges in the upcoming clinical trials. At pre-clinical stage it has already shown many side effects. What else does Abbott have? Perhaps a new HIV drug, which will compete in a small market against that of Merck, Agouron, Glaxo, and many more. It will most likely remain in the single digit growth rate until the end of the century. Will continue later.
Depends on your holdings, I would at least cash out 30% of the Abbott stock around the split and move it into other companies, like Merck or Watson Pharmaceuticals. Depends on the post split activites, you can cash out the rest. Frankly I don't know how Abbott stock will do around the split date. In short term, the company really has nothing exciting to offer to the market since it really occupies none of the important therapeutic areas--ie, CNS, Cardivascualr, Immunoregulation, and Cancer. To be fair, it is a stable company and it will be around for a long time. The bottom line however is to use your money in the most effective way. A merger with another company will cause significant changes in Abbott structures, right now I doubt the board or the top management want to do that. Therefore, I don't see merger on the horizon. Abbott has to get its house in order before it can engage in merger talks. Acquisition is a possibility. Good luck.
Zdnews, I am well aware of the lengthy process involved in bringing a new drug to market, and there is always a risk that a it will prove too toxic in safety trials, or that it will prove ineffective in efficacy trials, etc. etc. And it always takes a long time to bring a new drug to market, especially one that involves a novel mechanism of action. So Abbott is not going to see any profits from its potential new painkiller for quite a while.
But can you detail why you think that the compound derived from the poison arrow frog toxin is a "joke"? Your two statements are (a) it faces "formidable challenges" in the upcoming clinical trials and (b) "at a pre-clinical stage it has already shown many side effects."
What is statement (a) supposed to mean? What are the "formidable challenges" that this drug faces that others don't?
With regard to statement (b), what knowledge of the results in pre-clinical trials do you have? Are you a physician participating in the trials? Whence does your knowledge derive?
You clearly know something about this business, and I sincerely appreciate your informed discussion of the status of Abbott's drugs. But to term this potentially exciting new drug a "joke" seems an overreaction to others' perhaps-excessive enthusiasm about a drug that is far short of the market.
I well know the drawbacks of conventional painkillers. Investing aside, it would be a shame if this new drug did not pan out.
Well said. I have to agree with the assessment. However, I think Abbott Diagnostic division could see some improvements in the next two years. Will this make up the loss on the pharmceutical area? I really don't know. I guess it is fair to say that Abbott is not Pfizer, Merck, Warner Lambert, Glaxo, Eli Lilly or even Schering Plough, it is in a growing pain. It has suffered from the conservative style of management for years. Historically it has not performed as well as the average of pharmaceutical companies. Today's surge is probably due to option expiration as well as the broad move in pharmaceutical stocks, less so due to the intrinsic strength of Abbott. I have defended Abbott to a certain degree in previous posts, to be fair to the readers of this thread, I would have to say: if you own Abbott for many years, stay with it, it is going to stay flat for a while but it will take off again after a few quarters, there is no need to give Uncle Sam tax benefit; if you have invested in Abbott for less than two years, move out the stock for a while or minimize your holding--there are many better pharmaceutical stocks, like Merck, Schering Plough, Norvatis, etc. In any case, we will see a lot of volatility here. My sources say that there will be additional downgrades soon. So the facts are there, do you have the stomach to stay with an ill giant? It is for you to answer......FYI, I have cut down my holding in Abbott this afternoon when it reached 75.