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Abbott Labs to Close St. Jude Acquisition Later this Week

Zacks Equity Research

Abbott Laboratories ABT announced that it will close the acquisition of St. Jude Medical, Inc. STJ on Jan 4, 2017.

Shares of Abbott Labs underperformed the Zacks classified Large Cap Pharmaceuticals industry in 2016. In fact, Abbott Labs lost 10.6% in 2016, compared with a drop of 4.2% for the industry.

The company has obtained all regulatory clearances necessary for closing the transaction.

The acquisition will render Abbott Labs a leading position with a strong and diverse portfolio of devices, diagnostics, nutritionals and branded generic pharmaceuticals. The merged entity would control more than 70% of the vascular closure device market.

St. Jude Medical has a dominant position in fast-growing areas such as atrial fibrillation, heart failure, structural heart and chronic pain, which will complement Abbott Labs' leading position in the coronary interventions and mitral valve disease markets.

Post acquisition, Abbott Labs will compete in nearly every field of the $30 billion cardiovascular market, and boast a strong position across large and high-growth cardiovascular device markets.

The combined portfolio will have the depth, breadth, scale and innovation to help patients restore their health, improve outcomes and deliver greater value to customers and payors with products like EnSite Precision, ConfirmRx, HeartMate 3, Portico Transcatheter Aortic Heart Valves and Proclaim DRG system.

The combined cardiovascular and neuromodulation portfolio will generate annual sales of approximately $8.7 billion.

The acquisition of St. Jude Medical is expected to be accretive to Abbott Labs’ bottom line in the first full year and increase thereafter, making contributions of approximately 21 cents in 2017 and 29 cents in 2018. The acquisition will also generate annual pre-tax synergies of $500 million by 2020, including both sales and operational benefits.

Last week, Abbott Labs agreed to divest two medical device businesses to settle Federal Trade Commission (FTC) charges in relation to the St. Jude Medical acquisition. The divestment will ensure fair competition in the U.S. markets for medical devices used in cardiac and vascular catheterization. Note that the FTC had alleged that the proposed acquisition would impact the competitive scenario in the U.S. markets for vascular closure devices if the company proceeds without a remedy.

Abbott Labs currently carries a Zacks Rank #3 (Hold).

ABBOTT LABS Price and Consensus

 

ABBOTT LABS Price and Consensus | ABBOTT LABS Quote

Key Picks in the Sector

A couple of better-ranked stocks in the health care sector include Heska Corp. HSKA and Vanda Pharmaceuticals VNDA. Both of them sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Heska’s earnings estimates increased from $1.13 to $1.35 for 2016 and from $1.38 to $1.53 for 2017 over the last 60 days. The company posted a positive earnings surprise in all of the four trailing quarters with an average beat of 301.64%. Its share price has increased 93.7% year to date.

Vanda’s loss estimates for 2016 narrowed from 62 cents to 45 cents, while its earnings estimates for 2017 decreased from 13 cents to 9 cents over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 56.65%. Its share price has surged almost 77.4% year to date.

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ABBOTT LABS (ABT): Free Stock Analysis Report
 
ST JUDE MEDICAL (STJ): Free Stock Analysis Report
 
HESKA CORP (HSKA): Free Stock Analysis Report
 
VANDA PHARMACT (VNDA): Free Stock Analysis Report
 
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