Abbott Eyes Optics Company

February 4th, 2009 | Sources: Wall Street Journal


Abbott Laboratories announced last week it has acquired Advanced Medical Optics of Santa Ana, California for $2.8 billion.

The deal valued the Lasik eye surgery supplier at $22 per share, which had to open a few eyes since the company had been trading under $9 and Lasik isn’t thought to be a recession-proof procedure.

Not only that, Advanced Medical’s contact-lens solution was pulled off the market 2 years ago after it was linked to a potentially sight-threatening infection known as Acanthamoeba keratitis. 

But even the most vociferous critics would have to agree, Abbott’s recent track record on acquisitions is above reproach. The device maker has dropped $21 billion in the last 10 years on acquisitions beginning with a $680 million purchase of Perclose in 1999.

That represented a jaw-dropping 60 times earnings but in time most came to evaluate that buy as smart, even frugal.

Two years later Abbott acquired Knoll Pharmaceuticals from BASF for $6.9 billion. At the time Knoll was a sleepy producer of thyroid hormone-replacement drugs but then wouldn’t you know it?

It developed Humira, a blockbuster monoclonal antibody used for rheumatoid arthritis, Crohn’s disease, psoriasis and other conditions. Now, Abbott receives 70% of its earnings per share from drugs, and most of that comes from Humira. 

Abbott then acquired Guidant’s interventional cardiology business, and it too turned to gold. Guidant’s Xience drug-eluting stent recently whipped Boston Scientific’s Taxus in head-to-head trials. 

“We note ABT’s solid track record of timing, executing and integrating transactions,” understated Leerink Swann in a written statement picked up by the Wall Street Journal.

And remember, Advanced Medical traded in the mid-20s before the Feds played Russian roulette with Lehman Brothers and the chamber turned out to be loaded.


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