Abbott Labs (NYSE:ABT) has started selling Absorb, the world’s first drug eluting bioresorbable vascular scaffold (DEVS), in international markets including Europe and parts of Asia Pacific and Latin America. Following this launch, we expect the company to introduce its next-generation Xience Xpedition, a drug-eluting stent (DES), in Europe and other markets after the device recently got the European CE approval. (Read Abbott’s Next-Generation Stent To Enter Europe After CE Approval). All of these events lend support to our expectation that Abbott will overcome near-term headwinds in the vascular market and increase its market share 2013 onward.
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The medical devices market is highly competitive and consumers care about technological innovation and convenience of use, among other factors. Healthcare companies, including Abbott Labs, have been facing increasing pricing pressure due to austerity efforts following the slowdown in the global economy. The strengthening of the U.S. dollar also poses a concern. The impact of these factors reflected in Abbott’s recent quarter results and so, we expect the company’s market share to decline in 2012.
However, the company has increased its efforts to launch technologically advanced products to maintain as well as grow its market share. Abbott’s Absorb is the first of its kind device for the treatment of coronary artery disease (narrowing of the small blood vessels). The device works similar to a metallic stent in restoring blood flow. But, a complete dissolution into the body makes it more advantageous over other normal stents. With the launch of the device, Abbott will have first mover advantage and help it grab a bigger share of the vascular market, going forward.
Further, the company is also in the process of launching its Xience Xpedition stents. This launch will provide more options for doctors as well as patients. The product has a new and improved stent delivery system designed to optimize acute performance in challenging coronary cases.
However, both Absorb and Xience Xpedition are still in testing phases in the U.S. even as we expect the products to eventually receive the FDA approval. Without these approvals, we could see a downside to our estimates.
In our model, scaffold/stents are part of the company’s vascular franchise. Backed by such new products, we expect Abbott’s overall vascular market share to increase to reach nearly 18.5% by the end of Trefis forecast period. The vascular segment is Abbott’s largest contributor to growth, of late, due to the success of Xience and Promus coronary stents.
We recently revised our price estimate for Abbott Labs to $67. For further details, read our note here. We believe the company’s current valuation already reflects all the positive factors after appreciating nearly 30% last year. Abbott doesn’t have a very strong phase III pipeline in the pharmaceutical division with regards to any potential blockbuster drugs. This limits its growth potential and, as such, we don’t expect to see a major upside to the company’s current market price.