Abbott might cut back on drugs, putting faith in med tech growth

Abbott Laboratories ($ABT) is rumored to be shopping around a portion of its sizable generic drug business, possibly looking to cash out and focus on its fast-growing diagnostics segment.

According to Reuters' sources, Abbott has recruited Morgan Stanley to help it find a buyer for a stable of mature drugs, constituting about $2 billion of the roughly $5 billion the Illinois company makes on generics each year. The products could go for more than $5 billion, the news service reports.

Such a divestiture would leave Abbott's sizable med tech segment as its banner growth driver. Since spinning its proprietary drug business off into AbbVie ($ABBV) last year, Abbott's largest business has been nutrition, which grew 4.3% to $6.7 billion. But that unit has turned in consecutive quarters of slumping sales, falling 4% in Q1, leaving Abbott's diagnostics unit as the only consistent source of sales momentum.

The company's testing business grew 5.9% to $4.6 billion in 2013 and was the only segment to chart revenue gains in Q1, growing 2.6% to help offset another quarterly decline in the larger medical devices segment.

Abbott's device unit, focused largely on vascular technologies, has long been on the decline, as maturing products led to largely flat sales of $5.5 billion last year. But Abbott is betting on a spate of next-generation products, led by its Absorb dissolvable stent, to hit the market in the coming year and light the way to a return to growth.

Abbott's reported interest in paring down follows a fast-spreading trend among the giants in life sciences, as Merck ($MRK), Novartis ($NVS) and GlaxoSmithKline ($GSK) have all pulled off high-dollar business sales in the past month, with Sanofi ($SNY), Pfizer ($PFE) and AstraZeneca ($AZN) said to be considering the same.

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