Last week, Abbott unveiled a plan to separate into two publicly traded companies, one focusing on diversified medical products and the other on research-based pharmaceuticals. The medical-products company will retain the Abbott name and encompass Abbott’s branded generic pharmaceutical, medical-device, diagnostic, and nutritional businesses. The pharmaceutical company will be renamed and will include Abbott’s current portfolio of proprietary pharmaceuticals and biologics.

The research-based pharmaceutical company now has roughly $18 billion in annual revenue. Its portfolio includes the Humira, Lupron, Synagis, Kaletra, Creon, and Synthroid therapies. The company expects future growth to be based on its R&D pipeline, which includes more than 20 new compounds or indications in Phase II or III development. The compounds encompass various medical areas, including immunology, multiple sclerosis, chronic kidney disease, Hepatitis C, women’s health, oncology, and neuroscience, including multiple sclerosis and Parkinson’s and Alzheimer’s diseases. The company will continue to earn most of its revenue from developed markets.

The diversified medical-products company has approximately $22 billion in annual revenue and is divided into four major businesses. Its products include established pharmaceuticals (i.e., branded generics outside the US), adult and pediatric nutritionals, core laboratory diagnostics, point-of-care and molecular diagnostic devices, and medical devices. This company expects to generate nearly 40% of its sales in high-growth emerging markets and will seek opportunities for further expansion in these markets. Abbott already has a large presence in India. The company also will have a pipeline of new products and technologies.

Miles D. White will remain chairman and CEO of Abbott, the diversified medical-products company. Richard A. Gonzalez, executive vice-president of global pharmaceuticals, will become chairman and CEO of the research-based pharmaceutical company. Gonzalez has been with the company for more than 30 years and was previously its president and chief operating officer.

The transaction will take the form of a tax-free distribution to Abbott shareholders of a new publicly traded stock for the new pharmaceutical company. The expected stock distribution ratio will be determined at a future date. The two companies are expected to pay dividends that together will equal the current Abbott dividend.

The separation of the company will not affect Abbott’s earnings-per-share guidance for 2011. The transaction is expected to be completed by the end of 2012, subject to approval by the Abbott board of directors and regulators. Abbott expects to incur one-time charges related to the transaction, to be quantified at a later date.

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