Absorb is the only fully dissolving stent approved and is made of a naturally dissolving material
Drug major Abbott Laboratories Inc. (NYSE: ABT) has achieved a major breakthrough after the U.S. Food and Drug Administration (FDA) approved on July 5th, 2016, its first-of-its-kind bioresorbable heart stent called Absorb, used for the treatment of people with coronary artery disease (CAD). With this approval, Abbott has gained a leg-up in the high-growth cardiovascular market since CAD affects over 15 million people in the U.S. alone and remains a leading cause of death worldwide.
Stents are small devices, usually made of metal, placed inside a patient’s artery in order to facilitate free blood flow. Absorb is the only fully dissolving stent approved for the treatment of CAD and is made of a naturally dissolving material. Absorb disappears completely in approximately three years, after promoting healing of the treated artery segment. Absorb also releases a drug called everolimus, which prevents the growth of scar tissue that can narrow an artery again following stent insertion.
Advantages over metal stents
About 850,000 patients in the U.S. are treated with stents each year, according to Decision Resources Group, and as reported by The Wall Street Journal on July 5th, 2016. Drug-coated metal stents, first approved in 2003, are most commonly used for CAD, in which the drug gradually soaks into the wall of the artery to prevent growth of scar tissue that can cause clots. However, recent studies have shown that the drug-coated stents are associated with heart attack at a rate of 2% to 3% a year. Hence, the usage of a dissolvable stent is expected to reduce such adverse effects and promote long-term benefits for patients undergoing balloon angioplasty and stent procedures to treat CAD.
The FDA’s approval for Absorb holds much promise for Abbott since it controls a little more than a third of the U.S. stent market. Moreover, a dozen medical device makers are working on their own dissolving stent technologies. The success of Absorb would allow rival companies such as Medtronic Inc. (NYSE: MDT) and Boston Scientific Corp. (NYSE: BSX) to raise prices of their stents and thereby boost sales, after stent sales fell roughly 30% to $4.1 billion in 2014 from the levels seen in 2006.
Abbott plans to launch Absorb in hospitals that participated in its clinical trials in the U.S. The device is already being marketed in Europe, Latin America, and several Asian countries and has been implanted in more than 150,000 patients, according to Abbott. Abbott expects to price the new stent slightly higher than the $1,200 to $1,400 price range of its Xience™ drug eluting stent.
Acquisition of St. Jude Medical
In recent years, Abbott has been stepping up the pace of acquisitions to enable it to develop capabilities in high-growth categories and extend its global reach. On April 28th, 2016, Abbott announced that it has entered into a definitive agreement to acquire medical devices manufacturer St. Jude Medical Inc. (NYSE: STJ). The merged entity would create a medical device leader with a leading position in the high-growth cardiovascular market and the neuromodulation market. Under the agreement, St. Jude Medical shareholders will receive $46.75 in cash and 0.8708 shares of Abbott common stock, representing a total consideration of approximately $85 per share, thus valuing the transaction at roughly $25 billion, as per a company release.
The deal would give Abbott access to St. Jude Medical’s new medical device products including the EnSite Precision™ next-generation cardiac mapping system. The combined entity is expected to achieve annual pretax synergies of $500 million by 2020, including sales and operational benefits. The transaction, which is pending regulatory approvals, is expected to close in Q4 FY16.
Acquisition of Alere
Abbott earlier announced on February 1st, 2016, that is has signed a definitive agreement to acquire Alere Inc. (NYSE: ALR), significantly boosting its global diagnostics presence. Under the terms of the agreement, Abbott will pay $56 per common share at a total expected equity value of $5.8 billion. Once the transaction is completed, Abbott will become the leading diagnostics provider of point of care testing. Abbott’s total diagnostics sales will exceed $7 billion after the acquisition. More than half of Alere’s $2.5 billion in sales are from the U.S. market. Alere also has a strong presence in key international markets, where Abbott’s capabilities and infrastructure will drive growth of Alere’s portfolio. The combined entity is expected to garner annual pre-tax synergies of $500 million by 2019, including both sales and operational benefits.
Abbott’s stock stood at $40.83, gaining 3.52%, at the close on Wednesday, July 6th, 2016, having vacillated between an intraday high of $40.88 and a low of $39.25 during the session. The stock’s trading volume was at 13,176,087 for the day. The Company’s market cap was at $60.32 billion as of Wednesday’s close.