|Abbott CEO Miles White|
News that Abbott ($ABT) is preparing a $25 billion bid for drugmaker St. Jude Medical ($STJ) hogged the headlines this morning, but in the latest twist, the drug and devicemaker just told Reuters it isn't interested in St. Jude.
According to the Financial Times, which broke the disputed story, Abbott was interested in St. Jude earlier this year but wanted the future of generic drug company Mylan ($MYL) to become clear first. That's because Abbott acquired a significant stake in Mylan when it sold its developed market generic drug business to the company.
When that deal was announced in July, Abbott said it doesn't plan to be a long-term shareholder in Mylan and promised in a release that it will "redeploy the net proceeds from this transaction to opportunities that would be accretive to earnings over time."
Abbott supported Mylan's successful effort to fend off an acquisition by Israel's Teva Pharmaceutical ($TEVA), even though a sale of the company would have given the drug and devicemaker cash to launch a bid on St. Jude, the FT reports.
But the article says Abbott is still confident it can afford to purchase St. Jude.
Although the company just denied the FT story, Abbott CEO Miles White acknowledged during the company's earnings call that Abbott needs to add breadth to its cardiovascular and cardiology offerings, saying, "You probably should not assume that we're just sitting here on our hands accumulating (cash)," adding, "Investors expect us to deploy cash, and we do, and we will."
A deal for St. Jude would certainly accomplish the goals of bulking up in the cardiovascular space and deploying cash, especially because the device bigwig is on track to acquire LVAD maker Thoratec ($THOR) for $3.4 billion in cash.
The companies are already collaborating under the so-called Choice Alliance, formed in 2008. In 2012, the co-promotion alliance was expanded to include Abbott's coronary and endovascular products, such as its Xience line of drug-eluting stents, as well as St. Jude devices, including ablation catheters, pacemakers, implantable cardioverter defibrillators and optical coherence tomography imaging products. Abbott also gained the right to distribute two St. Jude devices related to coronary artery lesion assessment using fractional flow reserve.
Through moves such as the sale of its developed market generic drug business, Abbott has clearly signaled it intends to focus on the device arena, not the drug one. The company spun off its innovative drugs business in 2013, resulting in the creation of AbbVie ($ABBV).
St. Jude shares are up about 4.5% in premarket trading on the now-disputed FT acquisition rumor, giving it a market cap of about $20 billion, similar to what it was before last week's market rout.
Abbott shares are up nearly 4% in premarket trading to about $44, though they remain depressed from precrash levels of around $50. The company has a market cap of about $66 billion.