Abbott to Extend Pipeline with Kidney Drug Purchase; Opens R&D Center in India

by Trefis Team
+5.04%
Upside
38.38
Market
40.31
Trefis
ABT
Abbott Labs
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Abbott Labs (NYSE:ABT) recently purchased kidney drug AP214 from Danish company Action Pharmaceuticals for $110 million. This drug, meant to prevent acute kidney injury, is currently in mid-stage trials. Abbott has a limited presence in the kidney diseases segment with only one drug Zemplar, and is looking to expand its Kidney drugs pipeline with this purchase. It also plans to open a R&D center in Bangalore, India, for maternal and child nutrition and diabetes care in collaboration with Syngene, the contract research arm of Biocon.

Abbott Labs is one of the most diversified healthcare companies globally with operations in development, manufacturing and marketing of pharmaceuticals and other medical products, including nutritionals and diagnostics. It competes with healthcare companies such as Johnson & Johnson (NYSE:JNJ), Pfizer (NYSE:PFE) and Merck (NYSE:MRK).

See our complete analysis for Abbott Labs

Purchase of AP214 Kidney Drug

AP214, a drug for acute kidney injury, is currently under trial, and was purchased by Abbott at an early stage of development. According to the contract, Action Pharmaceuticals will not be eligible for milestone payments or royalties relating to the drug development. [1] The kidney diseases drug market is progressively growing with the global revenues expected to grow nearly by 5-6% over the next few years. [2] The drug will help Abbott foray into a potentially lucrative space and help it diversify into newer, less explored therapeutic markets.

Abbott reports kidney related drugs in others segment, and we expect it to gain higher revenues in this segment, going forward.

R&D Center in India

The company announced that it will open a R&D center in India by June 2012 with around 50 scientists. This center would primarily cater to maternal and child nutrition alongside diabetes care. Abbott had previously attempted to enter the Indian market with the acquisition of Wockhardt Pharma, but it lost to French company Danone (PINK:DANOY) which purchased the latter for nearly $300 million. [3]

Abbott has been desperate to enter the nutritional market in emerging countries as the nutritional market in developed markets is nearly saturated. With population of 1.3 billion, the nutritional market in India is estimated at $1 billion by the Federation of Indian Chambers of Commerce and Industry (FICCI). [4] India presently also has 51 million diabetes patients and offers a huge market for diabetes products.

With a diversified portfolio of offerings from pharmaceuticals to diagnostics, Abbott is well poised to grab a share of the emerging markets. We maintain a $65.83 Trefis price estimate for ABT, which is a 5% upside to its  current market price.

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maternal & child nutrition and diabetes care
Notes:
  1. Abbott Labs Buys Kidney Drug; Plans Indian R&D Center, Investors.com, May 3, 2012 []
  2. Kidney and Renal Diseases Therapeutics Market to 2017 – Strong Pipeline and Unmet Need Due to Poor Safety Profiles to Create Opportunities for Growth, Marketresearch.com, June 2011 []
  3. Abbott Laboratories in pact with Biocon to develop nutrition products, The Economic Times, May 4, 2012 []
  4. Abbott Labs partners Biocon to develop nutrition products for India, The Economic Times, May 3, 2012 []
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