Abbott Labs buying Solvay’s drug business for $6.6B bln in an overseas deal to boost portfolio

Abbott buys Solvay pharma operations for $6.6B

NEW YORK — Abbott Laboratories on Monday said it would pay $6.6 billion for the pharmaceutical business of Belgian chemicals maker Solvay in a move to further expand internationally and add to its product portfolio.

The deal is the latest in a string of drug mergers and acquisitions, and one of three announcements Monday that involved the fast-growing vaccines business.

By purchasing Brussels-based Solvay, Abbott gains access to emerging markets in Eastern Europe and Asia along with new therapeutic areas, including hormone therapies and vaccines.

Solvay’s flu vaccine Influvac will give Abbott an entrant in the burgeoning vaccines market, which is currently dominated by European pharmaceutical giants like GlaxoSmithKline and Novartis.

Also on Monday, Johnson & Johnson bought an 18 percent stake in Dutch biotechnology company Crucell NV, which is trying to develop a universal flu vaccine, while competitor Merck acquired the rights to sell Australia-based CSL Ltd.’s Afluria flu vaccine in the U.S.

North Chicago, Ill.-based Abbott already holds U.S. marketing rights for Solvay’s Trilipix and TriCor, drugs which raise “good” HDL cholesterol while reducing triglycerides and “bad” LDL cholesterol.

Solvay’s other top-selling drugs include the Parkinson’s disease treatment Duodopa and hormone therapy drugs AndroGel and Duphaston.

Monday’s announcement is the latest in a string of mergers and acquisitions, as cash-rich pharmaceutical companies race to acquire new products amid looming patent expirations. Earlier this year Swiss drugmaker Roche acquired biotech pioneer Genentech following similar deals uniting Pfizer Inc. and Wyeth, and Merck & Co. with Schering-Plough.

Analysts said Abbott’s purchase was designed to diversify Abbott’s revenue stream, more than 35 percent of which relies on the blockbuster drug Humira. The injectable drug, which will lose patent protection in 2016, treats rheumatoid arthritis and other inflammatory diseases.

Wall Street appeared to back the deal, sending Abbott shares up $1.25, or 2.6 percent, to close at $48.58 in Monday trading.

But Credit Suisse analyst Catherine Arnold had doubts about how much new revenue the deal would generate, especially considering the patent on Tricor expires in two years.

“Solvay does not add long-term growth or reduce Abbott’s dependence of growth on Humira,” Arnold wrote in a research note.

Morgan Stanley’s David Lewis said the deal offers “marginal diversification,” but would give Abbott greater access to markets in Europe and elsewhere.

More than 25 percent of Solvay’s $3 billion in revenue last year came from emerging markets, including Russia, India and Brazil.

Miles D. White, chairman and chief executive of Abbott, said the deal could add up to $3 billion in additional annual sales, while giving the company more diverse portfolios in cardiology and neuroscience treatment areas.

It also gives the company $500 million in additional research and development capacity, that can be used to drive future pharmaceutical unit growth, White said.

“We are adding from a position of strength,” White said, citing the company’s sales in international and emerging markets.

In the last year, Abbott has bought contact lens maker Advanced Medical Optics, India-based Wockhart’s nutritional business, eye care company Visiogen and Evalve, a maker of heart repair equipment.

Credit rating service Moody’s downgraded the company’s outlook to “negative” from “stable,” on Monday, saying the string of acquisitions “could reduce Abbott’s financial flexibility.”

Solvay said in a statement the sale will let it “refocus” its activities, which also cover chemicals and plastics.

“We are building a new refocused group with the financial means to further accelerate sustainable growth,” Alois Michielsen, Solvay’s chairman, said.

Solvay said the deal’s value could jump by another $439 million if sales targets are met for certain drug products.

In addition, Abbott would also take on liabilities worth about $584 million.

The sale is expected to close in the first quarter of 2010, pending antitrust approval from the EU and U.S.

Abbott makes and markets pharmaceutical and medical products in more than 130 countries and employs more than 72,000 people.

Growth of the company’s pharmaceutical unit has been driven by Humira, which had sales of $4.5 billion last year.

Solvay Pharmaceuticals is a group of companies that employs 9,000 people worldwide and had sales of 2.7 billion euros in 2008. The Solvay Group as a whole employs more than 29,000 people in 50 countries. Its 2008 consolidated sales were 9.5 billion euros.