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Ex-US Launch for Abbott's Absorb

Zacks Equity Research

Abbott Labs (ABT) recently announced the launch of Absorb, the world's first drug eluting bioresorbable vascular scaffold (:BVS), in Europe and parts of Asia Pacific and Latin America.

Absorb, a first-of-its-kind device, is approved for the treatment of coronary artery disease (CAD).

Like a metallic stent, Absorb restores blood flow to the heart. However, unlike a metallic stent, Absorb dissolves in the body, thereby allowing the treated vessel to work in a more natural manner given the absence of a permanent metallic stent.

According to Abbott Labs, a dissolving scaffold could have certain long-term advantages including expansion and contraction of vessels as required and reduction in the need for long-term treatment with blood thinners. Moreover, the absence of a permanent implant could make future interventions smoother.

We note that Absorb is currently under development in the US. Apart from Europe, parts of Asia Pacific (including Hong Kong, Singapore, Malaysia and New Zealand) and parts of Latin America, Absorb is available in the Middle East.

The launch of Absorb should boost the performance of Abbott Labs’ vascular devices segment which posted sales of $766 million in the second quarter of 2012.

Meanwhile, Abbott Labs has been working on expanding its position in the $2 billion plus core coronary market. The company’s next-generation balloon dilatation catheter, TREK, is already available in the US, Europe and Japan. Abbott Labs is currently working on launching additional balloon catheters and next-generation guide wires in the coming years.

Neutral on Abbott Labs

We currently have a Neutral recommendation on Abbott Labs, which carries a Zacks #3 Rank (short-term ‘Hold’ rating). Abbott Labs remains on track to split into two separate publicly traded companies by year end. While one company will deal in diversified medical products, the other (AbbVie) will focus on research-based pharmaceuticals. We are positive on the split which should allow the two separate entities to perform in a more focused manner. Humira continues to perform well and this should reduce concerns regarding AbbVie’s growth prospects.

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