How Does Abbott’s Established Pharmaceuticals Business Compare With Its Peers?

Abbott Labs’ (NYSE:ABT) established pharmaceuticals business offers a broad line of branded pharmaceuticals, manufactured worldwide, and marketed and sold outside the U.S. The major products sold through this segment include Creon, Brufen, Biaxin, Influvac, and Duphaston, among others. The segment is relatively small for the company, which derives most of its revenues from sales of medical devices. The established pharmaceuticals revenue stream has been growing in the recent past, and we expect this trend to continue in the near term. The segment revenues could grow from $4.42 billion in 2018 to $5.17 billion in 2021, according to Trefis estimates. This growth will likely be driven by higher sales from key emerging markets, primarily China and India. The overall segment revenues though are lower than that of larger pharmaceutical companies. Look at our interactive dashboard analysis ~ How Does Abbott’s Established Pharmaceuticals Business Compare With Its Peers? ~ for more details. You can also look at our data for healthcare companies here.

Abbott’s Established Pharmaceuticals Segment Revenue Could Grow Low To Mid-Single-Digits In The Coming Years

• Abbott’s established pharmaceuticals segment revenue could grow from $4.42 billion in 2018 to $5.17 billion in 2021.
• This can largely be attributed to higher demand for generic medicines in emerging markets.
• Abbott has been focused on emerging markets, which are likely to grow at a faster pace due to growth in income and healthcare, coupled with a relatively high degree of price-sensitivity among consumers.
• The company is working toward increasing the breadth of its product offerings by launching new and improved formulations with new branded generics, and expanding its presence in these key markets.
• Also, price sensitivity in emerging markets will continue to offer ideal market conditions for generics, and this should bode well for Abbott.

How Does The Growth For Abbott Compare To That of Its Peers

• For the next three years, we assume an average growth rate of:
  • 3.3% for Sanofi
  • -3.0% for Pfizer
  • 5.0% for Novartis

• This compares with our base case growth rate of 5.3% for Abbott over the same period.
• Sanofi saw lower sales last year, partly due to the sale of its European generics business ~ Zentiva. The segment could see some growth in the near term led by expansion in the emerging markets.
• Pfizer could see lower sales, due to strong competition for its legacy products.
• Novartis could see mid-single-digit growth over the next few years, led by higher sales of Galvus, Diovan, and Exforge in the emerging markets.

Estimating Established Pharmaceuticals Segment Contribution To Abbott’s Top Line

• Abbott’s established pharmaceuticals segment accounted for 18.5% of the company’s total revenues in 2016.
• The figure declined to 15.7% in 2017, and further to 14.5% in 2018, primarily due to St. Jude Medical and Alere acquisitions, which strengthened the company’s other segments. We expect the figure to remain around the current level in the coming years, as the company sees steady segment revenue growth.

Forecasting Abbott’s Market Share In Established Pharmaceuticals Business

• Combined established pharmaceutical products revenue for Abbott, Pfizer, Sanofi, and Novartis declined at an average annual rate of 2.8% from $36.5 billion in 2016 to $34.4 billion in 2018.
• Abbott’s share has grown from around 11% in 2016 to 13% in 2018.
• Looking forward, this trend could continue with Abbott’s share increasing to 14%, as it is expected to see faster growth, when compared to its peers.

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