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ABBOTT A Promise for Life

ABBOTT A Promise for Life. Investment Managers: Jonathan Barki Su Chen Lele Liang (Layla) Nan Liang Ran Mu (Renee) Presented: November 3, 2011. ABBOTT A Promise for Life. Transaction History. Bought 200 shares at $52.05 on April 28, 2011 Current Price: $52.88 (as of Nov 2)

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ABBOTT A Promise for Life

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  1. ABBOTT A Promise for Life Investment Managers: Jonathan Barki Su Chen Lele Liang (Layla) Nan Liang Ran Mu (Renee) Presented: November 3, 2011

  2. ABBOTT A Promise for Life Transaction History • Bought 200 shares at $52.05 on April 28, 2011 • Current Price: $52.88 (as of Nov 2) • Unrealized gain of $166, 1.59% (as of Nov 2)

  3. ABBOTT A Promise for Life Macroeconomics • Defensive / recession-proof Healthcare sector • Change in consumers’ behavior – postpone healthcare Source: Capital IQ

  4. ABBOTT A Promise for Life Healthcare Reform • Pharmaceutical firms set aside $80 billion over the next 10 years to reduce drug costs • Challenged to finance the initial costs of drug reform • 12 year exclusivity period on biologics before they face competition from generic alternatives • Tax credit for small biotech companies • No government intervention News Source: http://www.rsc.org/chemistryworld/News/2010/March/25031003.asp

  5. ABBOTT A Promise for Life Global Demographics Source: Google data

  6. ABBOTT A Promise for Life Global Consumption Power

  7. ABBOTT A Promise for Life Stock Performance Source: Capital IQ

  8. ABBOTT A Promise for Life Industry Current Revenue • US and Europe markets: growth slows down • Emerging markets: robust growth Source: IBIS World, April 18, 2011, P54

  9. ABBOTT A Promise for Life Industry Revenue Outlook Source: IBIS World, April 18, 2011, P56

  10. ABBOTT A Promise for Life Industry Characteristics Source: IBIS World, April 18, 2011, P10

  11. ABBOTT A Promise for Life Industry Main Players Source: IBIS World, April 18, 2011, P34

  12. ABBOTT A Promise for Life Industry Cost Structure Source: IBIS World, April 18, 2011, P25

  13. ABBOTT A Promise for Life Industry Key Factors • Key sensitivities: Population age, Systems and tech, attitudinal change and regulation • Key success factors: Brand names, tech sharing arrangements, R&D, product development and financing arrangement • Hold-back factors: Patent expirations, competition, a depleted product pipeline, regulatory, price pressures and deteriorating public opinion Source: IBIS World, April 18, 2011, P32

  14. ABBOTT A Promise for Life New Drug • New Chemical Entity: with patent– monopoly • high risk - time: 10-15 year - money: $800million- $1billion - probability of success: 1 out of 5,000 to 10,000 • high return • Generic Drug: no patent– competition • low risk • low return Source: Drug Discovery and Development, innovation.org

  15. 5,000-10,000 # enter into stage 250 5 1 Post- marketing Testing FDA Review & Approval Clinical Trials Phase II Clinical Trials Phase III Clinical Trials Phase I Pre- clinical Testing Drug Discovery In Market 1-2 years 0.5-2 years In lab: 3-6 years In hospital: 6-7 years ABBOTT A Promise for Life Drug Pipelines- New entity

  16. ABBOTT A Promise for Life Current Abbott • Pharmaceuticals • Nutritional Products • Diagnostic Products • Vascular Products • Others

  17. ABBOTT A Promise for Life Pharmaceuticals- diseases • Neurological disease -Alzheimer, Parkinson • Immunology -Crohn’s disease • Oncology -cancer • Kidney Disease • Pain Source: Abbott Investor Day 2011

  18. ABBOTT A Promise for Life Pharmaceuticals- diseases • Neurological disease -Alzheimer, Parkinson • Immunology -Crohn’s disease • Oncology -cancer • Kidney Disease • Pain Chronic diseases persistent demand Complex diseases high price

  19. ABBOTT A Promise for Life Pharmaceuticals- Products • Main Brands:

  20. ABBOTT A Promise for Life Pharmaceuticals- Products • Main Brands: • HUMIRA (48%) • -Crohn’s disease • TriCor/Trilipix (10%) • - Lipid disorders Source: Abbott Investor Day 2011

  21. ABBOTT A Promise for Life Current Abbott- Review • According to sale Pharmaceuticals Brand Drugs HUMIRA Other Branded Drugs Generic Drugs Generic Drugs I Generic Drugs II Nutritional Products Nutritional Products Nutritional Products Diagnostic Products Diagnostic Products Diagnostic Products Vascular Products Vascular Products Vascular Products

  22. ABBOTT A Promise for Life Spin off – End of 2012 • According to sale Pharmaceuticals Brand Drugs HUMIRA Other Branded Drugs Generic Drugs Generic Drugs I Generic Drugs II Nutritional Products Nutritional Products Nutritional Products Diagnostic Products Diagnostic Products Diagnostic Products Vascular Products Vascular Products Vascular Products

  23. ABBOTT A Promise for Life Current Abbott New Abbott: Diversified Medical Products New Pharmaceutical Company After Spin Off Generic Drugs II HUMIRA Nutritional Products Other Branded Drugs Diagnostic Products Vascular Products Generic Drugs I

  24. ABBOTT A Promise for Life New Pharma. Company-Old Brands • Old Brands with Patents (87%) • 5 main brands • Generic Drugs (13%) • Potential New Drugs

  25. ABBOTT A Promise for Life New Pharma. Company-Old Brands • Patent Expires!!

  26. ABBOTT A Promise for Life New Pharma. Company-R & D Bran Source: Abbott Investor Day 2011

  27. ABBOTT A Promise for Life New Pharma. Company- R & D Bran • In the short future:2014 • Bardoxolone: 7 billion • After next 10 years • 32 drugs in clinical phase I-III • E(succeeded new brands)=6

  28. ABBOTT A Promise for Life Key Developments Source: Abbott Investor Day 2011

  29. ABBOTT A Promise for Life Strategic Rationale Source: Abbott Investor Day 2011

  30. ABBOTT A Promise for Life Product Segments Source: Abbott Investor Day 2011

  31. ABBOTT A Promise for Life Geographic Expansion Source: Abbott Investor Day 2011

  32. ABBOTT A Promise for Life Established Pharmaceuticals • Over 500 branded generic products in portfolio • “Driving efficiencies without compromising quality” • Various structural changes • Hundreds of new products in the pipeline • Even split between Developed and Emerging Markets Source: Abbott Investor Day 2011

  33. ABBOTT A Promise for Life Medical Devices • Vascular Devices • For heart diseases • #1 in many facets • Over 20 new products in pipeline • Diabetes Care • Fastest growing in insulin-dependent patients in the US • Vision Care Source: Abbott Investor Day 2011

  34. ABBOTT A Promise for Life Diagnostic Products • Core Laboratory Diagnostics • #1 in immunoassay • #1 in blood screening • Over 69,000 customers • Molecular Diagnostics • HIV tests • Pioneering the development of bio-identification with Plex-ID • Point of Care Diagnostics • Market leader in bedside testing Source: Abbott Investor Day 2011

  35. ABBOTT A Promise for Life Nutritional Products Pediatric Nutritionals • 54% of sales • #1 in the US Adult Nutritionals • 46% of sales • #1 worldwide Source: Abbott Investor Day 2011

  36. ABBOTT A Promise for Life Financial Analysis Source: Capital IQ

  37. ABBOTT A Promise for Life Return on Invested Capital Source: Capital IQ

  38. ABBOTT A Promise for Life Dupont Analysis

  39. ABBOTT A Promise for Life Multiple Analysis 1-Current ABT • Johnson & Johnson: Pharmaceutical, Consumer, and Medical Devices and Diagnostics.  • Sanofi: Pharmaceutical, Vaccines and Diagnostics, Animal Health. • Novartis AG: Pharmaceuticals, Vaccines and Diagnostics, Sandoz division, and Consumer Health. • Pfizer Inc:  Pharmaceutical, Animal health products, Consumer healthcare products, and Nutrition products.  • Merck & Co: Pharmaceutical, Vaccines, Biologic therapies, Animal Health, and Consumer Care Products.

  40. ABBOTT A Promise for Life Comparables Valuation 1

  41. ABBOTT A Promise for Life Multiple Analysis 2-After Split

  42. ABBOTT A Promise for Life Comparables Valuation 2

  43. ABBOTT A Promise for Life Valuation Comps 1: $56.22 DCF: $69.09 Comps 2: $43.49 10% 10% 80% Final Valuation: $65.24

  44. ABBOTT A Promise for Life Recommendation

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