Abbott completes acquisition of Solvay Pharmaceuticals, eases EU antitrust concerns

After triggering and only recently resolving some anti-trust concerns in Europe, Abbott announced Feb. 16 that it has completed its $6.2 billion acquisition of Belgium-based Solvay Pharmaceuticals

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ABBOTT PARK, Ill.—After triggering and only recently resolving some anti-trust concerns in Europe, Abbott announced Feb. 16 that it has completed its $6.2 billion acquisition of Belgium-based Solvay Pharmaceuticals, "providing Abbott with a large and complementary portfolio of pharmaceutical products and expanding Abbott's presence in key global emerging markets."

Abbott stated its intention to acquire Belgian company Solvay on Sept. 28, 2009, for a then-estimated $6.6 billion cost—given the exchange rate at the time for the €4.5 billion offering price. This is the company's biggest deal since 2002, and it gives Abbott a footprint in Eastern Europe and Asia, where it has so far had a limited presence, as well as more exposure in Latin America and the Middle East, while also adding new drugs for hypertension and Parkinson's disease to Abbott's pipeline.

"The acquisition of Solvay Pharmaceuticals further diversifies our pharmaceutical portfolio, expands our presence in key high-growth emerging markets, enhances our investment in R&D and accelerates our long-term earnings-per-share growth outlook," according to Miles D. White, chairman and CEO of Abbott. The addition of Solvay provides Abbott with "a large and complementary portfolio of pharmaceutical products and a significant presence in key global emerging markets," he adds, and also includes full global rights to the fenofibrate franchise. Previously, Abbott had U.S. rights to fenofibrate and paid royalties to Solvay.

The acquisition also includes Solvay's vaccines business, which will provide Abbott entry into the expanding global vaccines market. Solvay also has a small molecular diagnostics unit that will become part of Abbott's diagnostics organization upon the transaction close.

The European Commission, however, had initiated an antitrust probe of Abbott's planned deal and early this month, it extended that probe by 10 working days to Feb. 11. At the heart of the issue were concerns by the commission that the two companies' high combined market shares in cystic fibrosis testing might have harmed competition on the markets. The European Union gave the green light to the deal after the Feb. 11 hearing, with the decision being conditional upon the divestment of the cystic fibrosis testing business of Solvay's subsidiary Innogenetics in Europe.

"In the light of the commitments, [we] concluded that the transaction would not significantly impede effective competition," the European Commission said in its official statement.

Based on the timing of the close, Abbott expects the acquisition to add approximately $2.9 billion to Abbott's 2010 total reported sales—only slightly down from the September prediction of $3 billion—with the majority of those sales outside the U.S. The acquisition will also add approximately $500 million to Abbott's annual pharmaceutical research and development investments.

"We believe Abbott can accelerate top- and bottom-line growth even faster in 2010," stated Rick Wise, an analyst with Leerink Swann & Co., in a research note on the effects of the Solvay purchase.  

"In anticipation of future market needs, we are ensuring we have the technologies, products, infrastructure and reach to serve patients globally and continue to deliver sustainable industry-leading growth," White says. "The acquisition of Solvay Pharmaceuticals is a key part of Abbott's strategy to bolster our presence in key markets and deliver sustainable, industry-leading growth. In addition to taking both Abbott and Solvay products into new and expanding markets, the acquisition enhances our R&D investment, providing Abbott with the opportunity to drive future pharmaceutical growth."

Abbott notes that it has a strong portfolio of specialty pharmaceuticals and Solvay brings successful, consistently performing products—including branded generics—that will further diversify Abbott's pharmaceutical business. These products complement Abbott's presence and expertise in specialty markets such as cardiovascular disease, neuroscience and gastroenterology, and include treatments for men's and women's hormonal health, and exocrine pancreatic insufficiency, which is associated with several underlying conditions such as cystic fibrosis and chronic pancreatitis.

"The combination of Solvay and Abbott's pharmaceutical businesses will enable Abbott to attain leadership in key emerging markets, where there is significant opportunity for branded generics," says Olivier Bohuon, executive vice president, Pharmaceutical Products Group, Abbott. "The addition of Solvay Pharmaceuticals is the catalyst for Abbott's growth and leadership in this area, and will ensure Abbott has the infrastructure, reach and product offerings to continue meeting the needs of patients around the world."

Solvay Pharmaceuticals is now part of Abbott's global Pharmaceutical Products Group. Werner Cautreels, CEO of Solvay Pharmaceuticals, will serve in a transitional role and will then leave the company.

Solvay's pharmaceutical unit generated just over $2.75 billion in sales in the first nine months of 2009, up 5 percent from the same period a year earlier. Products for cardio-metabolic needs and for men's and women's health made up most of the company's sales, generating $758 million and $760 million in revenue during the past three quarters, respectively. Emerging markets accounted for $564 million of Solvay's drug sales in the nine months ended Sept. 30, up 10 percent compared with the 2008 period.

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