Similac, an infant formula manufactured and distributed worldwide by Abbott Labs, has failed to qualify China national safety standards, according to CER Research, a Hong Kong-based research firm. Abbott Labs (NYSE:ABT) is a health care company operating in development, manufacturing and marketing of pharmaceuticals and other medical products, including nutritionals and diagnostics. It has a market capitalization of $96 billion and competes with Johnson & Johnson (NYSE:JNJ), Pfizer (NYSE:PFE) and Merck (NYSE:MRK).
The research was conducted in Germany on products bought in Shanghai and Hong Kong which failed to meet couple of criteria namely whey to casein protein ratio and low heat treatment intensity. The results were also confirmed at another study in Australia.
Similac is a product which falls under Abbott’s Nutritionals segment, which is nearly 13% of the company’s value. The company manufactures various forms of prepared infant formula and needs to be careful given its outreach to countries like China where growth in nutritionals segment is driven by population and demographics. If Abbott loses out market share to its competitor, it will miss out on a huge opportunity presented by emerging markets.
Separately, Abbott has been planning to split the company into two separate, publicly traded companies by the end of 2012. The new entity, AbbVie, would be an independent research-based pharmaceutical company whereas the parent company, Abbott will retain its name.
The rationale behind the spin-out is believed to be separating the parent company from liabilities which will appear because of 2016 expiration of Humira’s patent, a drug that represents nearly 21% of the $62 Trefis price estimate. All patented drugs including Humira will form part of the newer entity.