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Abbott Laboratories

Abbott Laboratories

100 Abbott Park Road
Abbott Park, Illinois 60064-6400
U.S.A.
Telephone: (847) 937-6100
Fax: (847) 937-9555
Web site: http://www.abbott.com

Public Company
Incorporated:
1900 as Abbott Alkaloidal Company
Employees: 60,000
Sales: $13.75 billion (2000)
Stock Exchanges: New York Chicago Pacific Boston Cincinnati Philadelphia London Swiss
Ticker Symbol: ABT
NAIC: 325412 Pharmaceutical Preparation Manufacturing; 325413 In-Vitro Diagnostic Substance Manufacturing; 334516 Analytical Laboratory Instrument Manufacturing; 311514 Dry, Condensed, and Evaporated Dairy Product Manufacturing; 541710 Research and Development in the Physical, Engineering, and Life Sciences

Abbott Laboratories is one of the oldest and most successful pharmaceutical companies in the United States. While about 30 percent of annual revenues come from the sale of pharmaceuticalsincluding Abbotts flagship drug, the antibiotic Biaxinthe company has a higher profile in the area of nutritionals, where its products include leading infant formula brands Similac and Isomil and a leading adult nutritional brand, Ensure. Abbott is also a top manufacturer of medical diagnostic equipment, with an emphasis on blood analyzers and the detection and monitoring of infections and diseases. The firms hospital products unit produces electronic and injectable drug-delivery systems, intravenous solutions and supplies, anesthetics, and products used in critical care settings. Abbotts annual research and development budget exceeds $1 billion, with areas of emphasis including AIDS/antivirals, anti-infectives, diabetes, neuroscience, oncology, pediatric pharmaceuticals, urology, and vascular medicine.

Early Decades

Abbott Laboratories has its origin in the late 19th century in a small pharmaceutical operation run from the kitchen of a Chicago physician named Wallace Calvin Abbott. As did other physicians of the time, Dr. Abbott commonly prescribed morphine, quinine, strychnine, and codeineall of which were liquid alkaloid extractsfor his patients. Because they existed only in a liquid form, these drugs were prone to spoilage over time, mitigating their effectiveness as treatments. In 1888, Dr. Abbott heard that a Belgian surgeon had developed alkaloids in solid form. Alkaloid pills soon became available in Chicago, but Dr. Abbott was dissatisfied with their quality, and he decided to manufacture his own.

Dr. Abbott began to advertise his products to other doctors in 1891. So successful was his business that he eventually sold shares to other doctors and incorporated his operation in 1900 as the Abbott Alkaloidal Company. By 1905, annual sales had grown to $200,000. Ten years later, the company changed its name to Abbott Laboratories. During World War I, Abbotts company was essential to the medical community, as several important drugs, manufactured exclusively by German companies, were no longer available in the United States. Abbott developed procaine, a substitute for the German novocaine, and barbital, a replacement for veneral.

After the war, Abbott continued to concentrate on the research and development of new drugs. In 1921, the company established a laboratory in Rocky Mount, North Carolina, which developed a number of new drugs, including sedatives, tranquilizers, and vitamins. Even after Dr. Abbotts death that year, the company continued to invest heavily in new product development and aggressive marketing campaigns. The company went public in 1929 with a listing on the Chicago Stock Exchange. Two years later, Abbott expanded outside the United States for the first time with the establishment of an affiliate in Montreal, Canada.

DeWitt Clough was named president of the company in 1933, ending a period of somewhat stale communal leadership. A more dynamic character than any since Dr. Abbott, Clough is best remembered for the inauguration of the company magazine, Whats New? The publication had such a positive impact on worker morale and public opinion that several of Abbotts competitors started similar publications. In 1936 Abbott began its long-term association with anesthetics when it introduced sodium pentothal, which had been developed by Abbott scientists Ernest Volwiler and Donalee Tabern (who in 1986 were named to the U.S. Inventors Hall of Fame for this discovery).

During World War II, Abbott once again played an important role in battlefield and hospital healthcare. By this time, American pharmaceutical companies such as Abbott were much less dependent on Germanys companies, particularly the IG Farbena conglomeration of the worlds most advanced drug manufacturers. After the war, much of the IG Farbens research was turned over to American manufacturers. Abbott, however, had little to gain from this information; it was already a worthy competitor on its own.

After the departure of DeWitt Clough in 1945, Abbott shifted its attention to the development of antibiotics. The company developed the antibiotic erythromycin, which, introduced under the brand names Erythrocin and E.E.S. in 1952, constituted a significant portion of Abbotts prescription drug sales for several decadeseven after the expiration of its 17-year patent. Sales of the drug increased dramatically when it was found to be an effective treatment for Legionnaires disease.

Abbott stumbled onto a lucrative new product when one of its researchers accidentally discovered that a chemical with which he had been working had a sweet taste. The chemical, a cyclamate, could be used as an artificial sweetener. Initially, from 1950, it was marketed to diabetics, but in the 1960s, as Americans became more health and diet conscious, it was increasingly used as a sugar substitute in a wide variety of foods.

In 1964 Abbott completed the first major acquisition in company history when it purchased Columbus, Ohio-based M&R Dietetic Laboratories. M&R was the manufacturer of Similac baby formula and over the succeeding decades, as the companys Ross Products Division, formed the basis for Abbotts market-leading infant and adult nutritionals business.

Late 1960s and Early 1970s: Diversification and Crises

By the mid-1960s, Abbott had gone several years without a major breakthrough in research, and none was projected at any time in the immediate future. Then, in 1967, Edward J. Ledder was named president of the company. He advocated a reduction in Abbotts emphasis on pharmaceuticals by diversifying into other fields. In the years that followed, Abbott introduced an array of consumer products, including Pream nondairy creamer, Glad Hands rubber gloves, Faultless golf balls, and Sucaryl, the cyclamate sugar substitute. In an effort to ensure the success of Abbotts consumer product line, Ledder placed Melvin Birnbaum, a highly experienced and able manager he had hired away from Revlon, in charge of the division. Ledders policy of diversification laid the groundwork for more flexible corporate strategies. No longer exposed exclusively within the pharmaceuticals market, Abbott was able to cross-subsidize failing operations until they could be rehabilitated.

Despite this flexibility, Abbott soon realized new obstacles to its growth. The companys hospital products competed in a limited, institutional market. New drugs had greater profit margins but were subject to government approval procedures that kept companies waiting for several years before they could market their discoveries. Consumer products, on the other hand, involved more expensive marketing and generated less profit than pharmaceuticals. Unable to increase profits without substantial risk, Abbotts management decided to maintain the strategies that were in place.

Cyclamate sales had grown so dramatically that by 1969 they accounted for one-third of Abbotts consumer product revenuesor about $50 million. The increasing popularity of cyclamates as an ingredient in diet foods, however, led the Food and Drug Administration (FDA) to conduct an investigation of possible side effects from their overuse. The FDAs research was widely criticized as fragmentary and fatally flawed, but it was nonetheless used as evidence that cyclamates were carcinogenic. The market collapsed in August 1970 when the FDA banned domestic sales of cyclamates. Abbott, which overnight had suffered the loss of one of its most profitable operations, protested the ban, but was unable to reverse the decision. Although the company continued to petition the FDA, subsequent studies confirmed that metabolization of cyclamates can lead to chromosome breakage and bladder cancer.

Less than a year after cyclamates were banned, Abbott was forced to recall 3.4 million bottles of intravenous solution. The bottles were sealed with a varnished paper called Gilsonite, which, it was discovered, harbored bacteria. The contamination was discovered only when healthcare workers noticed and then investigated the high incidence of infection in patients who had been administered Abbotts intravenous solutions. The Center for Disease Control linked the contaminated solutions to at least 434 infections and 49 deaths. With sales down from $17.9 million to $3 million, Abbotts share price began to fall. Abbott moved quickly to replace its Gilsonite seals with synthetic rubber, but the company was unable to regain its leadership of the intravenous market. Litigation resulted in the company eventually pleading no contest to a charge of conspiracy and paying a $1,000 fine.

Company Perspectives:

Abbotts vision is to be the worlds premier health care company. Simply put, we want to be the best the best employer, the best health care supplier, the best business partner, the best investment and the best neighbor.

While Abbott is broadly diversified, all of its thousands of products and people are dedicated to a common mission: to improve lives by providing cost-effective health care products and services.

Late 1970s Through 1980s: Emphasizing R&D, Nutritionals, Diagnostic Equipment

The crises of the early 1970s left the companys upper echelon of management weakened and vulnerable to criticism. Although Edward Ledder was recognized for the success of his diversification program (and largely excused for his inability to prevent either the cyclamate ban or the intravenous solution crisis), conditions were obviously ripe for the expression of talent by a new manager. Robert Schoellhorn, a veteran of the chemical industry, was just such a manager. His efforts as a vice-president in the hospital products division at Abbott resulted in a revenue increase of 139 percent for that division between 1974 and 1979. He correctly predicted that the next most profitable trend in healthcare would be toward cost-effective analysis and treatment. Schoellhorn was later promoted to president and chief operating officer of the company. Meantime, in 1977 Abbott entered into a joint venture with Takeda Chemical Industries, Ltd. of Japan called TAP Pharmaceuticals Inc. for the codevelopment and comarketing of pharmaceuticals.

Abbott Laboratories registered an annual sales growth rate of 15.5 percent and an earnings growth rate of 16.5 percent by 1979. This expansion was attributed by financial analysts to the companys increased productivity, reduced costs, expansion into foreign markets, and greater involvement in hospital nutritionals and diagnostic testing equipment. The company also introduced three new drugs in 1979: Depakene, an anticonvulsant; Tranxene, a mild tranquilizer; and Abbokinase, a treatment for blood clots in the lungs. All three products were the direct result of the companys increased investment in research and development in the mid-1970s.

Utilizing its knowledge of intravenous solution production, vitamin therapy, and infant formula, Abbott developed a comprehensive nutritional therapy program to speed the recovery of hospital patients and thereby reduce medical care costs. In the 1980s, as many as 65 percent of all hospital patients suffered from some form of malnutrition, so Abbott was highly successful in marketing their program. Another advantage of adult nutritional products was that they had a place in the growing home care market.

Abbott had similar success marketing its lines of diagnostic equipment. Electronic testing devices developed by Abbott proved more accurate than manual procedures. In order to strengthen the technical end of its diagnostic equipment research, Abbott hired two top executives away from Texas Instruments to head the division.

Robert Schoellhorn, who advanced to chairperson and chief executive officer in 1979, continued to emphasize investment in pharmaceutical research and development in the 1980s. Seven new drugs introduced in 1982 accounted for 17 percent of sales in 1985. Foreign operations also remained extremely important to Abbott, and the company had more than 75 foreign subsidiaries and manufacturing facilities in more than 30 countries. Schoellhorn continued to support Ledders original diversification policy. The introduction of Murine eye-care products and Selsun Blue dandruff shampoo served to expand the domestic consumer product line and promised to provide earning stability in the event of a downturn in any of the companys other markets.

Schoellhorn was also credited with promoting Abbotts emphasis on diagnostic equipment, especially blood analyzers. These devices were increasingly used to detect legal and illegal substances in the bloodstream. Abbott led the trend, developing the first diagnostic tests for Acquired Immune Deficiency Syndrome (AIDS), in 1985, and hepatitis. The companys Vision blood analyzer fit on a desktop and performed 90 percent of typical blood tests within eight minutes. By the end of the 1980s, sales of blood analysis devices represented a billion-dollar business, and medical diagnostic products (at $2.3 billion per year) constituted nearly half of Abbotts annual sales. Meanwhile, in the pharmaceuticals arena, Abbott in 1987 received FDA approval for a new drug called Hytrin for the treatment of hypertension. Hytrin was approved in 1993 for the treatment of noncancerous enlarged prostate.

Key Dates:

1888:
Dr. Wallace Calvin Abbott begins manufacturing alkaloid pills.
1900:
Abbott incorporates his firm as Abbott Alkaloidal Company.
1915:
Company changes its name to Abbott Laboratories.
1929:
Abbott goes public with a listing on the Chicago Stock Exchange.
1936:
Company introduces the anesthetic sodium pentothal.
1952:
Company launches a new antibiotic, Erythrocin.
1964:
Abbott acquires M&R Dietetic Laboratories, maker of Similac baby formula.
1967:
New president Edward J. Ledder begins a diversification into consumer products, including Sucaryl, a cyclamate sugar substitute.
1970:
FDA bans the sale of cyclamates.
1971:
Abbott is forced to recall 3.4 million bottles of intravenous solution.
1977:
Company forms joint venture with Takeda Chemical Industries, Ltd. of Japan called TAP Pharmaceuticals Inc.
1985:
Abbott develops the first diagnostic test for AIDS.
1987:
Abbotts Hytrin is approved by the FDA for the treatment of hypertension.
1991:
Clorithromycin, an antibiotic, is introduced.
1996:
Abbott acquires MediSense, Inc., a maker of blood-testing devices for diabetics.
1999:
Abbott agrees to acquire ALZA Corporation for $7.3 billion but the deal later collapses; Abbott agrees to pay a $100 million fine relating to quality control problems at its medical test kit plants; suture maker Perclose, Inc. is acquired.
2000:
FDA approves the AIDS drug Kaletra; Abbott agrees to acquire the Knoll Pharmaceutical Co. unit of BASF AG for $6.9 billion in cash.

Schoellhorn was widely praised as the driving force behind Abbotts phenomenal growth during the 1980ssales nearly tripled, profits doubled, and the pharmaceutical company rose to 90th from 197th on Fortunes list of the worlds top 500 companies. The leaders aggressive management style, however, often led to conflict. Over the course of the 1980s, three presidentsJames L. Vincent (1981); Kirk Raab (1985); and Jack W. Schuler (1989)quit. In December 1989, Abbotts board of directors unseated Schoellhorn, who in turn sued the company for his job. Abbott accused Schoellhorn of misappropriation of company assets and fraudulent conduct, adding that the former CEO exercised stock options worth $9.3 million within days of his release. Schoellhorn was succeeded by Vice-Chairman Duane L. Burnham.

1990s and Beyond: New Drug Introductions and Acquisitions

Unlike many of its competitors (including Merck, SmithKline Beecham, and Eli Lilly), Abbott did not acquire a drug distribution manager in the early 1990s. Instead, the company plowed funds into research and development. R&D outlays rose from 5.2 percent of sales in 1982 to more than 10 percent of sales by 1994by the latter year, R&D expenditures neared $1 billion. That year marked the companys 23rd consecutive earnings lift and helped Abbotts stock hold its value better than most competitors in the uncertain healthcare environment of the early 1990s.

Among key developments in the early 1990s was the introduction in 1991 of clorithromycin, an antibiotic developed as a successor to Abbotts erythromycin. Marketed in the United States under the name Biaxin, clorithromycin was useful in the treatment of common upper respiratory ailments such as the flu as well as other types of infections. It quickly became Abbotts flagship pharmaceuticaleventually achieving $1 billion in annual salesremaining so into the early 21st century.

New product introductions continued in the middle years of the decade. In 1994 Abbott introduced sevoflurane, an inhalation anesthetic that soon gained popularity because of its wide range of uses. The following year, TAP, the joint venture with Takeda Chemical, received FDA approval for Prevacid, an ulcer treatment (sales of Prevacid reached $1.3 billion by 1998). In 1996 FDA clearance was granted for Norvir, a protease inhibitor for the treatment of HIV and AIDS.

Despite these R&D successes, Abbotts earnings were failing to increase at the high-double-digit rate that they had in the 1980s, and the company was beginning to face the risk of being gobbled up by a larger rival in the rapidly consolidating healthcare industry of the 1990s. Shrugging off the conservative management of the early 1990s, Abbott moved aggressively in the second half of the decade to expand via acquisition and thereby stave off being acquired itself. In 1996 Abbott bolstered its diagnostics division through the $867 million purchase of MediSense, Inc., a Waltham, Massachusetts-based maker of blood-testing devices for diabetics. This was the companys first major deal since the 1964 acquisition of M&R Dietetic Laboratories. In 1997 Abbott spent about $200 million for certain intravenous product lines of Sanofi Pharmaceuticals, Inc., the U.S. unit of Frances Sanofi S.A. Included in this deal was Carpujet, an injectable drug-delivery system based on preloaded, single-dose syringes. Also in 1997, Abbott suffered a potential setback when Takeda Chemical did not renew a ten-year contract that gave Abbott the right of first refusal to distribute Takedas new drugs in the United States via the TAP venture. Takeda had decided to set up its own sales and marketing organization in the United States. By this time TAP was generating annual sales in excess of $2 billion, primarily from the marketing of Prevacid and Lupron, a prostate-cancer drug.

By 1997 Abbott had doubled its sales and earnings since Burnham had taken over from the ousted Schoellhorn. In early 1998 Burnham announced that he would retire in 1999. At the beginning of that year, Miles D. White, who had been a senior vice-president in charge of the diagnostics division, took over as CEO. Later in 1999, White was named chairman as well. During the leadership transition period in 1998, Abbott acquired Murex Technologies Corporation, a maker of diagnostics products, for $234 million. During 1999, Abbotts appetite for growth increased exponentially with the announcement in June of a deal to acquire ALZA Corporation for $7.3 billion in stock. ALZA was a leading producer of advanced drug-delivery systems and had a solid pipeline of new pharmaceuticals under development. The Federal Trade Commission (FTC), however, raised antitrust concerns about the merger, and when the two sides were unable to reach an agreement with the FTC, they called off the merger in December. Another possible factor in the collapse of the deal was the decline in Abbotts stock price following the companys agreement in November to pull 125 types of medical-diagnostic test kits off the U.S. market and to pay a $100 million civil penalty to the U.S. government. Since 1993 the FDA had been issuing warnings to Abbott regarding quality control deficiencies at its test kit plants, with the market withdrawal and payment of the fine being the outcome of this process. The FDA also cited poor manufacturing controls as the reason for its halting the sales of Abbotts clot-dissolving agent Abbokinase in early 1999.

In the meantime, Abbott managed to complete two smaller acquisitions in 1999. It acquired Perclose, Inc., a maker of sutures used to close arteries during angioplasty procedures, for about $600 million in stock. Abbott also paid $217 million in cash to Glaxo Wellcome Inc. for five anesthesia products. In January 2000 Abbott sold its agricultural products business to Sumitomo Chemical Co., Ltd. Abbott was now for the first time in decades a pure healthcare firm. Abbott in April of that year began marketing Biaxin XL, a new once-daily formulation of its flagship Biaxin antibiotic. The FDA in September 2000 granted expedited approval to Kaletra, a second-generation AIDS medication developed by Abbott. Kaletra had the potential to overtake the top AIDS drug, Pfizer Inc.s Viracept, because it had fewer side effects. It also appeared that patients did not develop resistance to Kaletra over time, as happened with most other AIDS drugs, including Viracept. Then in December 2000 Abbott launched another attempt at a major acquisition when it reached an agreement to acquire the Knoll Pharmaceutical Co. unit of German chemical giant BASF AG for $6.9 billion in cash. Once again, Abbotts aim was to bolster its product pipeline, and Knoll had at least one potential blockbuster in a drug called D2E7, an experimental rheumatoid arthritis treatment. Knolls existing products included Meridia, an obesity drug with annual sales of about $400 million, and Synthroid, a $150 million thyroid drug. The acquisition would also boost Abbotts pharmaceutical R&D budget to nearly $1 billion.

Principal Subsidiaries

Abbott Chemicals Plant, Inc.; Abbott Fermentation Products de Puerto Rico, Inc.; Abbott Health Products, Inc.; Abbott Home Infusion Services of New York, Inc.; Abbott International Ltd.; Abbott International Ltd. of Puerto Rico; Abbott Laboratories Inc.; Abbott Laboratories International Co.; Abbott Laboratories Pacific Ltd.; Abbott Laboratories (Puerto Rico) Incorporated; Abbott Laboratories Residential Development Fund, Inc.; Abbott Laboratories Services Corp.; Abbott Trading Company, Inc.; Abbott Universal Ltd.; AC Merger Sub Inc.; CMM Transportation, Inc.; Corporate Alliance, Inc.; IMTC Technologies, Inc.; Murex Diagnostics, Inc.; North Shore Properties, Inc.; Oximetrix de Puerto Rico, Inc.; Perclose, Inc.; Solartek Products, Inc.; Sorenson Research Co., Inc.; Swan-Myers, Incorporated; TAP Finance Inc.; Tobal Products Incorporated; Abbott Laboratories Argentina, S.A.; Abbott Australasia Pty. Limited (Australia); MediSense Australia Pty. Ltd.; Abbott Gesellschaft m.b.H. (Austria); Abbott Hospitals Limited (Bahamas); Murex Diagnostics International, Inc. (Barbados); Abbott, S.A. (Belgium); Abbott Laboratorios do Brasil Ltda. (Brazil); Abbott Laboratories Limited (Canada); International Murex Technologies Corporation (Canada); Abbott Laboratories de Chile Limitada (Chile); Abbott Laboratories de Colombia, S.A.; Abbott Laboratories s.r.o. (Czech Republic); Murex Diagnostica, Spol. s.r.o. (Czech Republic); Abbott Laboratories A/S (Denmark); Murex Diagnostics A/S (Denmark); Abbott Laboratorios del Ecuador, S.A.; Abbott, S.A. de C.V. (El Salvador); Abbott OY (Finland); Abbott France S.A.; Alcyon Analyzer S.A.; MediSense France SARL; Murex Diagnostics (France) S.A.; Abbott G.m.b.H. (Germany); Abbott Diagnostics G.m.b.H. (Germany); Murex Diagnostica GmbH (Germany); Abbott Laboratories (Hellas) S.A. (Greece); Abbott Laboratorios, S.A. (Guatemala); Abbott Laboratories Limited (Hong Kong); Abbott Laboratories (Hungary) Ltd.; Abbott Laboratories (India) Ltd. (51%); Abind Healthcare Private Limited (India); P.T. Abbott Indonesia (97%); Abbott Laboratories, Ireland, Limited; Abbott Ireland Ltd.; Abbott S.p.A. (Italy); Murex Diagnostici S.p.A. (Italy); Abbott Japan K.K. (Japan); Dainabot Co., Ltd. (Japan; 73%); Abbott Korea Limited; Abbott Middle East S.A.R.L. (Lebanon); Abbott Laboratories (Malaysia) Sdn. Bhd.; Abbott Laboratories de Mexico, S.A. de C.V.; Abbott Laboratories (Mozambique) Limitada; Edisco B.V. (Netherlands); Abbott B.V. (Netherlands); Abbott Laboratories B.V. (Netherlands); Abbott Finance B.V. (Netherlands); Abbott Holdings B.V. (Netherlands); MediSense Europe B.V. (Netherlands); MediSense Netherlands, B.V.; IMTC Holdings B.V. (Netherlands); IMTC Finance B.V. (Netherlands); Murex Diagnostics Benelux B.V. (Netherlands); Abbott Laboratories (N.Z.) Limited (New Zealand); Abbott Norge A S (Norway); Abbott Laboratories (Pakistan) Limited (83.42%); Abbott Laboratories, C.A. (Panama); Abbott Overseas, S.A. (Panama); Abbott Laboratorios S.A. (Peru); Abbott Laboratories (Philippines); Abbott Laboratories Sp. z.o.o. (Poland); Abbott Laboratorios, Limitada (Portugal); Abbott Laboratories (Singapore) Private Limited; Abbott Laboratories South Africa (Pty.) Limited; Abbott Laboratories, S.A. (Spain); Abbott Cientifica, S.A. (Spain); Abbott Scandinavia A.B. (Sweden); Abbott A.G. (Switzerland); Abbott Laboratories S.A. (Switzerland); Abbott Finance Company S.A. (Switzerland); Abbott Laboratories Taiwan Limited; Abbott Laboratories Limited (Thailand); Abbott Laboratuarlari Ithalat Ihracat Ve Tecaret Limited Sirketi (Turkey); Abbott Investments Limited (U.K.); Abbott Laboratories Limited (U.K.); Abbott (UK) Holdings Limited; Abbott Laboratories Trustee Company Limited (U.K.); IMTC Holdings (UK) Limited; MediSense Britain, Ltd. (U.K.); MediSense UK Ltd.; Murex Biotech Limited (U.K.); Specialist Diagnostica Limited (U.K.); Abbott Laboratories Uruguay Limitada; Abbott Laboratories, C.A. (Venezuela); Medicamentos M & R, S.A. (Venezuela).

Principal Divisions

Pharmaceutical Products; Ross Products; Hospital Products; Abbott International; Diagnostics; Specialty Products.

Principal Competitors

Merck & Co., Inc.; Eli Lilly and Company; Pfizer Inc.; Bristol-Myers Squibb Company; American Home Products Corporation; Johnson & Johnson; AstraZeneca PLC; Aventis; Bayer AG; GlaxoSmithKline plc; Schering-Plough Corporation; Novartis AG; Roche Holding Ltd.

Further Reading

Abbott: Profiting from Products That Cut Costs, Business Week, June 18, 1984, pp. 56 +.

Baby Bottle Battle, Forbes, November 28, 1988, pp. 222 +.

Barrett, Amy, and Richard A. Melcher, Drugmaker, Heal Thyself, Business Week, October 11, 1999, pp. 88 +.

Benoit, Ellen, Abbott Laboratories: Room at the Top, Financial World, October 17, 1989, p. 28.

Berss, Marcia, Aloof But Not Asleep, Forbes, August 29, 1994, pp. 4344.

Bleiberg, Robert M., Abbott and Costello: The Ban on Cyclamates Is a Comedyor Tragedyof Errors, Barrons, October 9, 1978, p. 7.

Bob Schoellhorn Is Refusing to Go Quietly, Business Week, March 26, 1990, pp. 34 +.

Burton, Thomas M., Abbott Laboratories and Alza Call Off Their Deal, Wall Street Journal, December 17, 1999, p. B10.

, Abbott Labs to Buy BASF Unit for $6.9 Billion, Wall Street Journal, December 15, 2000, pp. A3, A12.

, Abbotts White Wins CEO Job, Wall Street Journal, September 16, 1998, p. A3.

, Abbott to Pay $100 Million in Fine to United States, Wall Street Journal, November 3, 1999, p. A3.

, Federal Judge Clears Abbott in Formula Case: Bid Process for Infant Food Is Called Questionable, but Oversight Is Faulted, Wall Street Journal, June 1, 1994, p. A3.

Carter, Kim, Abbott Laboratories Betting Its Future on the Development of New Products, Modern Healthcare, November 7, 1986, pp. 138+.

Klein, Sarah A., Abbotts Biotech Biz Gets a Booster Shot: Picking Up Keys to State-of-the-Art Lab in BASF Deal, Crains Chicago Business, January 1, 2001, p. 4.

, Restocked Product Pipeline Invigorating Abbott, Crains Chicago Business, September 4, 2000, p. 4.

Kogan, Herman, The Long White Line: The Story of Abbott Laboratories, New York: Random House, 1963, 309 p.

Merrion, Paul, Nestlé Sours Baby Formula for Abbott, Crains Chicago Business, June 13, 1988.

Miller, James P., Abbott Labs Agrees to Purchase Alza, Wall Street Journal, June 22, 1999, p. A3.

, Abbott Ousts Schoellhorn As Chairman, Drawing Lawsuit by Embattled Official, Wall Street Journal, March 12, 1990, p. B6.

Oloroso, Arsenio, Jr., Abbotts Prescription for Sluggish Drug Biz Pays Off, Crains Chicago Business, October 21, 1991, p. 3.

, Abbotts Tough Rx: Buy or Risk Being Bought, Crains Chicago Business, March 2, 1998, p. 3.

, Abbott Tries Costly Growth Drug: M&A, Crains Chicago Business, April 8, 1996, p. 4.

, New CEO Poised to Rev Up Sleepy Abbotts Strategy, Crains Chicago Business, September 21, 1998, p. 4.

Salwan, Kevin G., Infant-Formula Firms Rigged Bids, U.S. Says, Wall Street Journal, June 12, 1992, p. A3.

Somasundaram, Meera, Abbott Set to Stock Medicine Cabinet: Drug Giant Expected to Shop for Mid-Sized Rivals, Crains Chicago Business, February 1, 1999, p. 1.

April Dougal Gasbarre
update: David E. Salamie

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Abbott Laboratories

Abbott Laboratories

One Abbott Park Road
Abbott Park, Illinois 60064-3500
U.S.A.
(708) 937-6100
Fax:(708) 937-1511

Public Company
Incorporated:
1900 as Abbott Alkaloidal Company
Employees: 49,659
Sales: $8.41 billion
Stock Exchanges: New York London Zurich Basle Geneva
Boston Cincinnati NASDAQ Philadelphia Pacific
Lausanne
SICs: 2834 Pharmaceutical Preparations; 2833 Medicinals
and Botanicals; 2835 Diagnostic Substances; 2844 Toilet
Preparations; 2879 Agricultural Chemicals, Not Elsewhere
Classified; 3841 Surgical and Medical Instruments; 3845
Electromedical Equipment; 3826 Laboratory Analytical
Instruments

Abbott Laboratories is one of the oldest and most successful of Americas pharmaceutical companies. While ethical drugs only accounted for one-fourth of its annual sales in the early 1990s, Abbott ranked as a top manufacturer of medical diagnostic equipment, with an emphasis on blood analyzers, and was also a leading producer of infant formulas under the Similac and Isomil brands, which commanded over half of the $3 billion American market. Abbotts consumer brands also included Clear Eyes and Murine eye care products; Selsun Blue shampoo; and Ensure nutritional supplement. Moreover, the company held the patent on the truth serum sodium pentothal and continued to lead sales of the antibiotic erythromycin, which it introduced in 1952.

Abbott Laboratories has its origin in the late nineteenth century in a small pharmaceutical operation run from the kitchen of a Chicago physician named Wallace Calvin Abbott. As did other physicians of the time, Dr. Abbott commonly prescribed morphine, quinine, strychnine, and codeineall of which were liquid alkaloid extractsfor his patients. Because they existed only in a liquid form, these drugs were prone to spoilage over time, mitigating their effectiveness as treatments. In 1888, Dr. Abbott heard that a Belgian surgeon had developed alkaloids in solid form. Alkaloid pills soon became available in Chicago, but Dr. Abbott was dissatisfied with their quality, and he decided to manufacture his own.

Dr. Abbott began to advertise his products to other doctors in 1891. So successful was his business that he eventually sold shares to other doctors and incorporated his operation in 1900 as the Abbott Alkaloidal Company. By 1905, annual sales had grown to $200,000. During World War I, Abbotts company was essential to the medical community, as several important drugs, manufactured exclusively by German companies, were no longer available in the United States. Abbott developed procaine, a substitute for the German novocaine, and barbital, a replacement for veneral.

After the war, Abbott continued to concentrate on the research and development of new drugs. In 1921, the company established a laboratory in Rocky Mount, North Carolina, which developed a number of new drugs, including sedatives, tranquilizers, and vitamins. Even after Dr. Abbotts death that year, the company continued to invest heavily in new product development and aggressive marketing campaigns.

DeWitt Clough was named president of the company in 1933, ending a period of somewhat stale communal leadership. A more dynamic character than any since Dr. Abbott, Clough is best remembered for the inauguration of the company magazine, Whats New?. The publication had such a positive impact on worker morale and public opinion that several of Abbotts competitors started similar publications.

During World War II, Abbott once again played an important role in battlefield and hospital health care. By this time, American pharmaceutical companies such as Abbott were much less dependent on Germanys companies, particularly the IG Farbena conglomeration of the worlds most advanced drug manufacturers. After the war, much of the IG Farbens research was turned over to American manufacturers. Abbott, however, had little to gain from this information; it was already a worthy competitor on its own.

After the departure of DeWitt Clough in 1945, Abbott shifted its attention to the development of antibiotics. The company developed erythromycin, which, under the brand names Erythrocin and E.E.S., constituted a significant portion of Abbotts prescription drug sales for several decadeseven after the expiration of its 17-year patent. Sales of the drug increased dramatically when it was found to be an effective treatment for Legionnaires disease.

Abbott stumbled onto a lucrative new product when one of its researchers accidentally discovered that a chemical with which he had been working had a sweet taste. The chemical, a cyclamate, could be used as an artificial sweetener. Initially, from 1950, it was marketed to diabetics, but in the 1960s, as Americans became more health and diet conscious, it was increasingly used as a sugar substitute in a wide variety of foods.

By the mid-1960s, Abbott had gone several years without a major breakthrough in research, and none was projected at any time in the immediate future. Then, in 1967, Edward J. Ledder was named president of the company. He advocated a reduction in Abbotts emphasis on pharmaceuticals by diversifying into other fields. In the years that followed, Abbott introduced an array of consumer products, including Pream non-dairy creamer, Glad Hands rubber gloves, Faultless golf balls, and Sucaryl, the cyclamate sugar substitute. In an effort to ensure the success of Abbotts consumer product line, Ledder placed Melvin Birnbaum, a highly experienced and able manager he had hired away from Revlon, in charge of the division. Ledders policy of diversification laid the groundwork for more flexible corporate strategies. No longer exposed exclusively within the pharmaceuticals market, Abbott was able to cross-subsidize failing operations until they could be rehabilitated.

Despite this flexibility, Abbott soon realized new obstacles to its growth. The companys hospital products competed in a limited, institutional market. New drugs had greater profit margins but were subject to government approval procedures that kept companies waiting for several years before they could market their discoveries. Consumer products, on the other hand, involved more expensive marketing and generated less profit than Pharmaceuticals. Unable to increase profits without substantial risk, Abbotts management decided to maintain the strategies that were in place.

Cyclamate sales had grown so dramatically that by 1969 they accounted for one-third of Abbotts consumer product revenuesor about $50 million. The increasing popularity of cyclamates as an ingredient in diet foods, however, led the FDA to conduct an investigation of possible side effects from their overuse. The FDAs research was widely criticized as fragmentary and fatally flawed, but it was nonetheless used as evidence that cyclamates were carcinogenic. The market collapsed in August 1970 when the FDA banned domestic sales of cyclamates. Abbott, which overnight had suffered the loss of one of its most profitable operations, protested the ban, but was unable to reverse the decision. Although the company continued to petition the FDA, subsequent studies have confirmed that metabolization of cyclamates can lead to chromosome breakage and bladder cancer.

Less than a year after cyclamates were banned, Abbott was forced to recall 3.4 million bottles of intravenous solution. The bottles were sealed with a varnished paper called Gilsonite, which, it was discovered, harbored bacteria. The contamination was discovered only when health care workers noticed and then investigated the high incidence of infection in patients who had been administered Abbotts intravenous solutions. The Center for Disease Control linked the contaminated solutions to at least 434 infections and 49 deaths. With sales down from $17.9 million to $3 million, Abbotts share price began to fall. Abbott moved quickly to replace its Gilsonite seals with synthetic rubber, but the company was unable to regain its leadership of the intravenous market. Litigation resulted in the company eventually pleading no contest to a charge of conspiracy and paying a $1,000 fine.

The crises of the early 1970s left the companys upper echelon of management weakened and vulnerable to criticism. Although Edward Ledder was recognized for the success of his diversification program (and largely excused for his inability to prevent either the cyclamate ban or the intravenous solution crisis), conditions were obviously ripe for the expression of talent by a new manager. Robert Schoellhorn, a veteran of the chemical industry, was just such a manager. His efforts as a vice-president in the hospital products division at Abbott resulted in a revenue increase of 139 percent for that division between 1974 and 1979. He correctly predicted that the next most profitable trend in health care would be toward cost-effective analysis and treatment. Schoellhorn was later promoted to president and chief operating officer of the company.

Abbott Laboratories registered an annual sales growth rate of 15.5 percent and an earnings growth rate of 16.5 percent by 1979. This expansion was attributed by financial analysts to the companys increased productivity, reduced costs, expansion into foreign markets, and greater involvement in hospital nutritionals and diagnostic testing equipment. The company also introduced three new drugs in 1979: Depakene, an anticonvul-sant, Tranxene, a mild tranquilizer, and Abbokinase, a treatment for blood clots in the lungs. All three products were the direct result of the companys increased investment in research and development in the mid-1970s.

Utilizing its knowledge of intravenous solution production, vitamin therapy, and infant formula, Abbott developed a comprehensive nutritional therapy program to speed the recovery of hospital patients and thereby reduce medical care costs. In the 1980s, as many as 65 percent of all hospital patients suffered from some form of malnutrition, so Abbott was highly successful in marketing their program. Another advantage of adult nutritional products was that they had a place in the growing home care market.

Abbott had similar success marketing its lines of diagnostic equipment. Electronic testing devices developed by Abbott proved more accurate than manual procedures. In order to strengthen the technical end of its diagnostic equipment research, Abbott hired two top executives away from Texas Instruments to head the division.

Robert Schoellhorn, who advanced to chairperson and chief executive officer in 1979, continued to emphasize investment in pharmaceutical research and development in the 1980s. Seven new drugs introduced in 1982 accounted for 17 percent of sales in 1985. Foreign operations also remained extremely important to Abbott, and the company had over 75 foreign subsidiaries and manufacturing facilities in more than 30 countries. Schoellhorn continued to support Ledders original diversification policy. The introduction of Murine eye-care products and Selsun Blue dandruff shampoo served to expand the domestic consumer product line and promised to provide earning stability in the event of a downturn in any of the companys other markets.

Schoellhorn was also credited with promoting Abbotts emphasis on diagnostic equipment, especially blood analyzers. These devices were increasingly used to detect legal and illegal substances in the bloodstream. Abbott led the trend, developing the first diagnostic tests for Acquired Immune Deficiency Syndrome (AIDS) and hepatitis. The companys Vision blood analyzer fit on a desktop and performed 90 percent of typical blood tests within eight minutes. By the end of the 1980s, sales of blood analysis devices were a billion dollar business, and medical diagnostic products (at $2.3 million per year) constituted nearly half of Abbotts annual sales.

Schoellhorn was widely praised as the driving force behind Abbotts phenomenal growth during the 1980ssales nearly tripled, profits doubled, and the pharmaceutical company rose to 90th from 197th on Fortunes list of the worlds top 500 companies. The leaders aggressive management style, however, often led to conflict. Over the course of the 1980s, three presidentsJames L. Vincent (1981); Kirk Raab (1985); and Jack W. Schuler (1989)quit. In December 1989, Abbotts board of directors unseated Schoellhorn, who in turn sued the company for his job. Abbott accused Schoellhorn of misappropriation of company assets and fraudulent conduct, adding that the former CEO exercised stock options worth $9.3 million within days of his release. Schoellhorn was succeeded by vice-chairperson Duane L. Burnham.

Unlike many of its competitors (including Merck & Co., Smith-Kline Beecham plc, and Eli Lilly & Co.), Abbott had not acquired a drug distribution manager in the early 1990s. Instead, the company plowed funds into research and development. R & D outlays rose from 5.2 percent of sales in 1982 to over ten percent of sales by 1994. That year marked the companys 23rd consecutive earnings lift and helped Abbotts stock hold its value better than most competitors in the uncertain health care environment of the early 1990s.

Principal Subsidiaries

Abbott Biotech, Inc.; Abbott Chemicals, Inc.; Abbott Health Products, Inc.; Abbott Home Infusion Services of New York, Inc.; Abbott International Ltd.; Abbott Ltd. of Puerto Rico; Abbott Laboratories International Co.; Abbott Laboratories Pacific Ltd.; Abbott Laboratories (Puerto Rico) Inc.; Abbott Laboratories Residential Development Fund, Inc.; Abbott Laboratories Services Corp.; Abbott Manufacturing, Inc.; Abbott Trading Company, Inc.; Abbott Universal Ltd.; CMM Transportation, Inc.; Corporate Alliance, Inc.; Exact Science, Inc.; Fuller Research Corporation; Laser Surgery Partnership; Mediase Holding Corporation; North Shore Properties, Inc.; Oximetrix de Puerto Rico, Inc.; Oximetrix, Inc.; Sequoia Turner Corporation; Sequoia Turner Export Corp.; Solartek Products, Inc.; Sorenson Research Co., Inc.; Swan-Myers, Inc.; TAP Pharmaceuticals Inc. (50%); Tobal Products Inc. The company also owns subsidiaries in the following countries: Argentina, Australia, Austria, Bahamas, Belgium, Bermuda, Brazil, Canada, Chile, China, Colombia, Ecuador, El Salvador, England, France, Germany, Greece, Grenada, Guatemala, Hong Kong, India, Indonesia, Ireland, Italy, Jamaica, Japan, Korea, Lebanon, Malaysia, Mexico, Mozambique, the Netherlands, New Zealand, Nigeria, Pakistan, Panama, Peru, Philippines, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, Uruguay, and Venezuela.

Further Reading

Berss, Marcia, Aloof But Not Asleep, Forbes, August 29, 1994, pp. 43-44.

Kogan, Herman, The Long White Line: The Story of Abbott Laboratories, New York: Random House, 1963.

updated by April Dougal Gasbarre

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Abbott Laboratories

Abbott Laboratories

Abbott Park
North Chicago, Illinois
U.S.A.
(312) 937-6100
Public Company
Incorporated: March 6, 1900 as Abbott Alkaloidal
Company
Employees: 33,500
Sales: $3.808 billion
Market Value: $14.617 billion
Stock Index: New York London Zurich Basle Geneva
Lausanne

Abbott Laboratories is one of the oldest and most successful of Americas pharmaceutical companies. The man most responsible for the companys current impressive performance in the market place is Robert A. Schoellhorn. When Schoellhorn joined Abbott in 1973 (after 27 years with American Cyanamid), he found the company in an unprecedented state of disarray. Three years earlier the Food and Drug Administration had banned production of cyclamates, an artificial sweetener of which Abbott was a major producer; the FDA had also ordered the company to recall 3.4 million bottles of a contaminated intravenous solution. Though only a divisional vice-president at the time, Schoellhorn would later prove crucial to Abbotts impressive comeback. Today Abbotts prospects have never looked so goodit is one of the few drug manufacturers recommended as an investment by Wall Street brokers.

Abbott Laboratories has its origin in the late 19th century in a small pharmaceutical operation run from the kitchen of a Chicago physician named Wallace Calvin Abbott. As did other physicians of the time, Dr. Abbott commonly prescribed morphine, quinine, strychnine and codeine all of which were liquid alkaloid extractsfor his patients. Because they existed only in a liquid form, these drugs were prone to spoilage over time, mitigating their effectiveness as treatments. In 1888 Dr. Abbott heard that a Belgian surgeon had developed alkaloids in solid form. Alkaloid pills soon became available in Chicago, but Dr. Abbott was dissatisfied with their quality, and he decided to manufacture his own.

Dr. Abbott began to advertise his products to other doctors in 1891. So successful was his business that he eventually sold shares to other doctors and incorporated his operation in 1900 as the Abbott Alkaloidal Company. By 1905 annual sales had grown to $200,000.

During World War I Abbotts company was essential to the medical community: several important drugs, manufactured exclusively by German companies, were no longer available in the United States. Abbott developed procaine, a substitute for the German novacaine, and barbital, a replacement for veneral.

After the war, Abbott continued to concentrate on the research and development of new drugs. In 1921 the company established a laboratory at Rocky Mount, North Carolina which developed a number of new drugs, including sedatives, tranquilizers, and vitamins. Despite Dr. Abbotts death that year, the company continued to invest heavily in new product development and aggressive marketing campaigns.

DeWitt Clough was named president of the company in 1933, ending a period of somewhat stale communal leadership. A more dynamic character than any since Dr. Abbott, Clough is best remembered for the inauguration of the company magazine, Whats New? The publication had such a positive impact on worker morale and public opinion that several of Abbotts competitors started similar publications.

During World War II Abbott once again played an important role in battlefield and hospital health care. By this time American pharmaceutical companies such as Abbott were much less dependent on Germany companies, particularly the IG Farbena conglomeration of the worlds most advanced drug manufacturers. After the war much of the IG Farbens research was turned over to American manufacturers. Abbott, however, had little to gain from this information; it was already a worthy competitor on its own.

After the departure of DeWitt Clough in 1945, Abbott shifted its attention to the development of antibiotics. The company developed erythromycin, which, under the brand names Erythrocin and E.E.S., constituted a significant portion of Abbotts prescription drug sales for several decadeseven after the expiration of its 17-year patent. Sales of the drug increased dramatically when it was found to be an effective treatment for Legionnaires Disease.

Abbott stumbled onto a lucrative new product when one of its researchers accidentally discovered that a chemical with which he had been working had a sweet taste. The chemical, a cyclamate, could be used as an artificial sweetener. Initially, from 1950, it was marketed to diabetics, but in the 1960s, as Americans became more health and diet conscious, it was increasingly used as a sugar substitute in a wide variety of foods.

By 1965 Abbott had gone several years without a major breakthrough in research and, worse yet, none was projected at any time in the immediate future. Two years later Edward J. Ledder was named president of the company. He advocated a reduction in Abbotts emphasis on Pharmaceuticals by diversifying into other fields. In the years that followed, Abbott introduced an array of consumer products, including Pream non-dairy creamer, Glad Hands rubber gloves, Faultless golf balls, and Sucaryl, a cyclamate sugar substitute. In an effort to insure the success of Abbotts consumer product line, Ledder placed Melvin Birnbaum, a highly experienced and able manager he had hired away from Revlon, in charge of the division.

Ledders policy of diversification laid the groundwork for more flexible corporate strategies. No longer exposed exclusively within the pharmaceuticals market, Abbott was able to cross-subsidize failing operations until they could be rehabilitated. Despite this flexibility, Abbott soon realized new obstacles to its growth.

The companys hospital products competed in a limited, institutional market. New drugs had greater profit margins, but were subject to government approval procedures that kept companies waiting for several years before they could market their discoveries. Consumer products, on the other hand, involved more expensive marketing and generated less profit than pharmaceuticals. Unable to increase profits without substantial risk, Abbotts management decided to maintain the strategies that were in place.

Cyclamate sales had grown so dramatically that by 1969 they accounted for one-third of Abbotts consumer product revenuesor about $50 million. The increasing popularity of cyclamates as an ingredient in diet foods, however, led the FDA to conduct an investigation of possible side-effects from their overuse. The FDAs research was widely criticized as fragmentary and fatally flawed, but it was nonetheless used as evidence that cyclamates were carcinogenic. The market collapsed in August 1970 when the FDA banned domestic sales of cyclamates. Abbott, which overnight had suffered the loss of one of its most profitable operations, protested the ban, but was unable to reverse the decision. Although the company has continued to petition the FDA, subsequent studies have confirmed that metabolization of cyclamates can lead to chromosome breakage and bladder cancer.

Less than a year after cyclamates were banned, Abbott was forced to recall 3.4 million bottles of intravenous solution. The bottles were sealed with a varnished paper called Gilsonite, which, it was discovered, harbored bacteria. The contamination was discovered only when health care workers noticed and then investigated the high incidence of infection in patients who had been administered Abbotts intravenous solutions. The Center for Disease Control linked the contaminated solutions to at least 434 infections and 49 deaths. With litigation imminent and sales down from $17.9 million to $3 million, Abbotts share price began to fall. Abbott moved quickly to replace its Gilsonite seals with synthetic rubber, but then the company faced the larger problem of regaining market share.

The crises of the early 1970s left the companys upper echelon of management weakened and vulnerable to criticism. Although Edward Ledder was recognized for the success of his diversification program (and largely excused for his inability to prevent either the cyclamate ban or the intravenous solution crisis), conditions were obviously ripe for the expression of talent by a new manager. Robert Schoellhorn, a veteran of the chemical industry, was just such a manager. His efforts as a vice-president in the hospital products division at Abbott resulted in a revenue increase of 139% for that division between 1974 and 1979. He correctly predicted that the next most profitable trend in health care would be toward cost-effective analysis and treatment. Schoellhorn was later promoted to president and chief operating office of the company.

Abbott Laboratories registered an annual sales growth rate of 15.5% and an earnings growth rate of 16.5% by 1979. This expansion was attributed by financial analysts to the companys increased productivity, reduced costs, expansion into foreign markets, and greater involvement in hospital nutritionals and diagnostic testing equipment. The company also introduced three new drugs in 1979 Depakene, an anticonvulsant, Tranxene, a mild tranquilizer, and Abbokinase, a treatment for blood clots in the lungs. All three products were the direct result of the companys increased investment in research and development in the mid-1970s.

Utilizing its knowledge of intravenous solution production, vitamin therapy, and infant formula (Abbott holds one-half of the market for infant formula with Simulac), Abbott developed a comprehensive nutritional therapy program to speed the recovery of hospital patients and thereby reduce medical care costs. As many as 65% of all hospital patients suffer from some form of malnutrition, and Abbott has been highly successful in marketing their program. Another advantage of adult nutritional products is that they have a place in the growing home care market.

Abbott has had similar success marketing its lines of diagnostic equipment. Electronic testing devices developed by Abbott are more accurate than manual procedures. In order to strengthen the technical end of its diagnostic equipment research, Abbott hired two top executives away from Texas Instruments to head the division. Some of the products currently under development by Abbott include a device that can detect cancer from a blood test as well as fibers to be used to transmit surgical laser beams.

Robert Schoellhorn, now chairman and chief executive officer, has continued to emphasize investment in pharmaceutical research and developmentseven new drugs introduced in 1982 accounted for 17% of sales in 1985. Foreign operations also remain extremely important to Abbott (the company has 77 foreign subsidiaries and manufacturing facilities in 28 countries). Schoellhorn continues to support Ledders original diversification policy. The introduction of Murine eye-care products and Selsan Blue dandruff shampoo has served to expand the domestic consumer product line and promises to provide earning stability in the event of a downturn in any of the companys other markets.

While other hospital product companies struggle to compete in the new cost-conscious market, Abbott Laboratories has successfully engineered the smooth transition into the 1980s and looks superbly positioned to continue to grow in the 1990s.

Principal Subsidiaries

Abbott Diagnostics Inc.; Abbott Pharmaceuticals Inc.; Oximetrix de Puerto Rico Inc.; Hemostatix Inc.; CMM Transportation Inc.; Haven Leasing Corp. (80%); Murine Co. Inc.; M & R Diatetic Laboratories Inc.; Oximetrix Inc.; Ross Laboratories Inc.; Sorenson Research Co. Inc.; Swan-Meyers Inc.; Tobal Products Inc.; Takeda-Abbott Products Inc. (50%). The company also owns subsidiaries in the following countries: Argentina, Australia, Austria, Belgium, Bermuda, Brazil, Canada, Chile, Colombia, Denmark, Ecuador, El Salvador, England, France, Greece, Guatemala, Hong Kong, Ireland, Italy, Jamaica, Japan, Lebanon, Mexico, Mozambique, The Netherlands, Panama, Peru, Philippines, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, Thailand, Uruguay, Venezuela, and West Germany.

Further Reading

The Long White Line: The Story of Abbott Laboratories by Herman Kogan, New York, Random House, 1963.

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Abbott Laboratories

Abbott Laboratories

founded: 1888


Contact Information:

headquarters: 100 abbott park rd., dept. 393-ap51
abbott park, illinois 60064-3537 phone: (847)937-1608 url: http://www.abbott.com

OVERVIEW

Founded in 1888, Abbott Laboratories is a global, diversified, healthcare company that discovers, develops, manufactures, and markets pharmaceutical, diagnostic, nutritional, and hospital healthcare products. Headquartered in Chicago, Illinois, it is one of the top healthcare product makers in the United States. Abbott employs 70,000 people worldwide, and it has 150 facilities and 60 manufacturing sites. The company focuses on advancing medical science and the practice of healthcare, and it has demonstrated expertise in the therapeutic areas of diabetes, pain management, respiratory infections, HIV/AIDS, men and women's health, and pediatrics. Its products are sold in 130 countries. Abbott has five business segments: Pharmaceutical Products, Diagnostic Products, Hospital Products, Ross Products, and International. Its Ross Products division makes such well-known nutritionals as Similac, an infant formula, and Ensure, an adult nutrition supplement. Pharmaceuticals and hospital products make up about one-half of the company's sales.


COMPANY FINANCES

In 2000 the company's sales and net earnings were $13.7 billion and $2.8 billion, respectively, with diluted earnings per share of $1.78. For the fiscal year ended December 31, 2001, sales rose 18 percent to $16.29 billion; net income fell 44 percent to $1.55 billion. The company's hospital and pharmaceutical segments have been receiving higher unit sales, which is reflected as higher revenues. Approximately $1.33 billion of its 2001 revenues went into research and development.

ANALYSTS' OPINIONS

Abbott Laboratories boasts an impressive record of long-term financial performance and continuous growth. It is one of 25 companies to appear in all six annual editions of The 100 Best Stocks to Own in America. In 2001, the company ranked high on lists compiled by financial magazines and experts. It was number 166 in the performance rankings of the S&P 500, number 77 in Business Week magazine's "Global 1000," and ranked number 70 in Forbes magazine's "500 Top Companies." Abbott Laboratories was also named to the Deloitte and Touche "Fast 50 Companies" list. It has posted sales growth for 47 consecutive years, and it has showed dividend growth for 312 consecutive quarters since 1924.

Further, the company holds a first or second market position in the following business segments: adult nutritionals, anti-infectives, blood screening for infectious diseases, hematology diagnostics, immunodiagnostics, infant formulas/nutritionals, inhalation anesthetics, and vessel closure devices.

In 2001 analysts and observers believed that Abbott Laboratories' new AIDS drug, Kaletra, would give its pharmaceutical division an economic boost. They pointed to the fact that Abbott's Kaletra proved effective in more patients than Viracept, a drug produced by top competitor Pfizer. Analysts expected that Kalestra would improve Abbott's share of the $6.5 billion market for HIV and AIDS treatments and that it would generate $500 million in global sales in the early part of the twenty-first century. The news made investors happy, as they felt Kalestra would place a much-needed "blockbuster" drug in Abbott's product portfolio.


HISTORY

Abbott Laboratories was founded in 1888 by Wallace Calvin Abbott, MD, a Chicago physician, who proved to be a pioneer in the science of pharmaceuticals by producing a new form of medicine called "dosimetric granules." These pills enabled a precisely measured amount of drug. Within two years, the demand for these granules became overwhelming, setting the stage for the continual growth the company would consistently demonstrate through the years.

In 1900 Dr. Abbott officially incorporated the company as the Abbott Alkaloidal Company, and in 1915 he changed the name to Abbott Laboratories. Product demand spurred Dr. Abbott to build a new manufacturing facility in 1920. The building served as the company headquarters for 40 years, and it remains Abbott Laboratories' primary manufacturing location today.

In 1931 the company established its first international affiliate in Montreal, Canada. Five years later, it introduced the anesthetic agent Pentothal, which was developed by Abbott scientists Drs. Ernest Volwiler and Donalee Tabern, who were later named to the U.S. Inventors Hall of Fame for their discovery. Ten years later, Abbott started commercial production of penicillin. In 1945 the company entered the field of radiopharmaceuticals, which are radioactive drugs used for diagnostic or therapeutic purposes.

Throughout the next two decades, Abbott Laboratories continued to be an innovator. In 1952 it introduced Erythrocin, an antibiotic used to fight gram-positive bacteria. In 1962 Abbott entered a joint venture with Dainippon Pharmaceutical Co., Ltd., of Osaka, Japan, to manufacture radiopharmaceuticals. This venture would become Dainabot, which would grow to become the company's largest operation outside the United States.

FAST FACTS: About Abbott Laboratories


Ownership: Abbott Laboratories is a publicly owned company. It is listed on the New York, Chicago, Pacific, London and Swiss Stock Exchanges and is traded on the Boston, Cincinnati, and Philadelphia exchanges.

Ticker Symbol: ABT

Officers: Miles D. White, Chmn. and CEO; Richard A. Gonzalez, Pres. and COO, Medical Products Group; Jeffrey M. Leiden, MD, PhD, Pres. and COO, Pharmaceutical Products Group; Christopher B. Begley, SVP, Hospital Products; William G. Dempsey, SVP, International Operations

Employees: 70,000

Principal Subsidiary Companies: Abbott Laboratories owns 50 percent of TAP Pharmaceutical Products Inc. Subsidiaries and affiliates include Abbott Laboratories MediSense Products, Knoll GmbH, and Vysis, Inc.

Chief Competitors: Abbott Laboratories' competitors include AstraZeneca; Aventis; Bristol Myers Squibb Co.; Eli Lilly and Company; Merck and Company, Inc.; Pfizer; and Roche.


The company continued to grow during the 1960s, 1970s, and 1980s. In 1964 Abbott merged with M&R Dietetic Laboratories of Columbus, Ohio, the maker of Similac infant formula. M&R would eventually become Abbott's Ross Products Division. Abbott formed its Diagnostics Division in 1973. That same year, it introduced the product Ensure, which would become the world's leading adult nutritional product. In 1977 Abbott entered into a joint venture with Takeda Chemical Industries, Ltd., which resulted in the formation of TAP Pharmaceuticals Inc., now known as TAP Holdings Inc. In 1980 Abbott acquired Sorenson Research of Salt Lake City, Utah.

As the company continued to grow, Abbott Laboratories' strong focus on research and development produced significant medical advancements. In 1985, the U.S. Food and Drug Administration (USFDA) gave the company clearance to market the world's first diagnostic test to detect AIDS. During the same period, TAP received approval to market Lupron, a new therapy for prostate cancer. Two years later, Abbott received USFDA approval for Hytrin (terazosin), a new cardiovascular drug used for treatment of hypertension. In Abbott's centennial year of 1988, the company introduced the IMx diagnostic instrument, which would become the world's leading immunoassay system and one of the Abbott's all-time best-selling new products.

In the 1990s, Abbott introduced Clarithromycin, a macrolide antibiotic that would become one of the world's leading respiratory antibiotics. Abbott also ventured into the hematology testing market when it acquired Sequoia-Turner Corp. As a result, it introduced several major products including Survanta (for treatment of neonatal respiratory distress syndrome), disease-specific medical nutritionals, and a second-generation diagnostic test for hepatitis C. The decade also saw Abbott launch AxSYM, a labor-saving diagnostic system for high-volume laboratories.

In 1995 Abbott scientists researched chemical interactions inside the brain in order to develop new therapies for neurological and psychiatric disorders. This resulted in the company's introduction of a new treatment for bipolar disorder. That same year, the company received expanded indications for Clarithromycin for both prevention and treatment of Mycobacterium avium complex, an infection common in AIDS patients; sought new drug applications for Norvir, to help combat AIDS, and tiagabine, to treat patients with epilepsy; and launched Abbott PRISM, the first fully automated, high-volume blood analyzer.

In 1996 Abbott scored another key acquisition when it bought MediSense, Inc., a company that produced blood glucose self-testing systems for diabetics. Also, it formed strategic alliances with Berlex Laboratories, Magnevist, and Ultravist, and SONUS Pharmaceuticals. The same year, Abbott's research into AIDS treatment resulted in Norvir being cleared for marketing around the world. Its HIV antigen assay for use in blood screening centers was cleared by the USFDA for the detection of the HIV-l antigen.

In 1997, on the nutritional front, the Ross Products division introduced an improved version of Similac, which featured a specialized blend of ingredients similar to breast milk, a new protein system, and an improved fat blend. That same year, four of Abbott's inventors were named 1997 National Inventors of the Year for developing protease inhibitors, a class of drugs for the treatment of HIV infection and AIDS.

CHRONOLOGY: Key Dates for Abbott Laboratories


1888:

Company is founded by Wallace Calvin Abbott, MD, in Chicago, Illinois

1915:

Abbott Alkaloidal Company becomes Abbott Laboratories

1931:

Abbott establishes its first international affiliate in Montreal, Canada

1936:

Abbott scientists Ernest Volwiler and Donalee Tabern develop Pentothal

1962:

Abbott enters a joint venture with Dainippon Pharmaceutical Co., Ltd. of Osaka, Japan

1964:

Abbott merges with M&R Dietetic Laboratories, the maker of Similac infant formula

1973:

Abbott introduces Ensure, which will become the world's leading adult nutritional product

1977:

Abbott enters into a joint venture with Takeda Chemical Industries, Ltd. to form TAP Pharmaceuticals Inc.

1985:

USFDA gives Abbott clearance to market the world's first AIDS diagnostic test

1996:

Abbott acquires MediSense, Inc., a company that produced blood glucose self-testing systems for diabetics

1998:

Miles D. White elected chief executive officer

1999:

Abbott Laboratories acquires Perclose, Inc., the leading arterial closure device manufacturer


As Abbott Laboratories forged ahead into the future, 1998 proved to be pivotal when Miles D. White elected chief executive officer. During the next two years, White would make several important acquisitions and agreements. (That was also the year that the USFDA granted marketing clearance for TriCor, a drug for patients with very high triglyceride levels.) In 1999, the year that White was elected chairman of the board, Abbott acquired Perclose, Inc., the leading arterial closure device manufacturer. Also, Abbott and Triangle Pharmaceuticals Inc. formed a worldwide alliance for six antiviral products.

Also in 1998, Abbott's Depakote became the most prescribed agent by psychiatrists for treating manic episodes associated with bipolar disorder. On the acquisitions and agreements front, Abbott and Boehringer Ingelheim of Germany agreed to co-market Boehringer Ingelheim's meloxicam in Latin America. Abbott acquired control of International Murex Technologies Corporation, a medical diagnostics company. The USFDA cleared the way for Abbott to market Zemplar, a treatment for secondary hyperparathyroidism associated with chronic renal failure, and Synagis, a monoclonal antibody for the prevention of serious lower respiratory tract disease caused by respiratory syncytial virus (RSV) in pediatric patients. Nutrition news included the launching of Similac Lactose Free, the Ensure Glucerna nutritional bar, and Ensure Glucerna OS beverage. The last two products were formulated for diabetics to help them better manage their blood glucose levels.

As the century drew to a close, Abbott's product portfolio continued growing. In 1999 Abbott received USFDA clearance for Depacon, for the temporary treatment of certain types of epilepsy, and for PREVACID, for treatment of ulcers. Also that year, Abbott expanded its hospital products area when it acquired the parenteral products business of Sanofi Pharmaceuticals, Inc.; this move gave Abbott worldwide rights to pre-filled, single-dose syringe technology with Sanofi's proprietary Carpuject drug delivery system. Also, Abbott received approval for Norvir soft-gelatin capsules and the right to market Precedex (dexmedetomidine hydrochloride injection), a sedative for the use in patients hospitalized in intensive care settings.


STRATEGY

Committing itself to innovation, Abbott strives to push the limits of pharmaceutical science and product development. Its corporate strategy focuses on developing highly integrated franchise areas, specifically in anti-infectives, anti-virals, neuroscience, urology, vascular medicine, and oncology. Utilizing both internal and external resources, and employing more than 5,000 international scientists, the company is committed to developing innovative healthcare technologies. To support the advancement of medical science, the company spends more than $1 billion each year toward research and development. The company's drug discovery efforts involve teams of specialized scientists working with advanced technologies including genomics, structural biology, combinational chemistry, and Structure Activity Relationships (SAR) by Nuclear Magnetic Resonance (NMR).

In the area of genomic research, Abbott scientist employ bioinformatics to analyze genetic data that leads to better understanding of the human genetic code. In the area of structural biology, Abbott researchers employ computer modeling to study the three-dimensional shape of molecules responsible for causing disease. In the area of combinational chemistry, Abbott scientists catalogue more than 250,000 compounds for analyzing. Abbott scientists have used SAR by NMR to identify inhibitors of a family of enzymes that affect cancer metastasis and arthritis.

In its anti-infective research, Abbott focuses on the development of potential new uses for existing antibiotics, as well as developing the next generation of anti-infectives designed to safely and effectively defeat emerging drug-resistant pathogens.


INFLUENCES

Abbott's continual growth and success, especially in the last two decades of the twentieth century, can be attributed to its focus on research and development and in its pursuit of strategic alliances and acquisitions. This approach has enabled the company to assume market leadership positions in the areas of AIDS/anti-viral drugs, anti-infectives, neuroscience, urology, and oncology.

Abbott's pharmaceutical business grew to nearly $9 billion in 2001, thanks to the development of core products such as Depakote, Flomax, and Kaletra, as well as through key business acquisitions. The company's medical products business, which includes its diagnostics, hospital products, and nutritionals businesses, reached more than $7 billion in sales.

Abbott's diagnostic division has become the recognized leader in the laboratory testing of body fluids, and the company has continually sought new ways to detect infectious diseases. Research areas focus on immunodi-agnostics, hematology, blood glucose monitoring, and DNA testing. In the late 1990s, Abbott researchers discovered a new strain of the hepatitis E virus and developed the world's first test to screen for HIV.

Another major focus for the company has been preventive health care through nutrition, which became a major concern for the U.S. population in the later part of the twentieth century. In the area of nutritionals, Abbott managed to take a top market position by utilizing the largest research industrial research team in the industry (more than 500 scientists). The company has developed and improved upon well-known products such as Similac infant formula and the Ensure brand of adult nutritionals.


CURRENT TRENDS

Abbott Laboratories has adopted an approach of innovation for sustained performance that is taking the company into the fields of biotechnology and molecular medicine. By combining biotechnology and traditional drug development, Abbott feels that it is creating a new model for pharmaceutical development. This, the company believes, will yield discoveries that have the potential to transform the practice of health care.

Abbott also feels that the companies best able to build on discoveries to create and commercialize differentiated, breakthrough products will have the advantage in the marketplace. To this end, Abbott acquired Knoll and formed an alliance with Millennium Pharmaceuticals, Inc. The acquisition of Knoll brought new scientific talent into the company, as well as new research centers in the United States, Germany, and Japan. Through its alliance with Millennium Pharmaceuticals, Abbott increased its investment in its genomics capability and established a major research program focused on diabetes and obesity. This, the company believes, will result in genetically based drugs and diagnostics to treat obesity and metabolism-related illnesses.

Also, Abbott strengthened itself in the area of genomics research with the acquisition of Vysis, Inc., a leading genomic disease management company. This acquisition brings with it new and innovative technology that detects subtle changes in genes and chromosomes. This, Abbott believes, will lead to a more precise diagnosis and monitoring of diseases.

Abbott also intends to build upon past successes. Since the 1930s, Abbott Laboratories has led discovery in the anesthesia market, and it continues seeking ways to develop new products in that area. Its Ross Product Division is in the process of developing next generation "Nutriceuticals," specially formulated products to help manage disease and enable self-treatment of lifestyle and health concerns.


PRODUCTS

Abbott Laboratories is involved in four significant business areas: nutritional products, pharmaceutical products, diagnostic products, and hospital products.

Abbott's nutritional brands are produced by its Ross Products Division, which has made the company a leader in adult and pediatric nutritionals. The adult products are designed to promote, maintain, and restore physical health. The division's best-known products include the adult nutritional product Ensure, and Similac and Similac 2, leading infant formulas. Other products include Isomil, NeoSure, Ensure Plus, Ensure High Protein, Ensure Light, PediaSure, Pedialyte, and Pulmocare. Most of those products are sold under the recommendation of healthcare professionals. The division's consumer products include Fact Plus Select and Fact Plus Pro pregnancy tests; Selsun Blue dandruff shampoo; and Murine eye care and ear care products.

Abbott's pharmaceutical products include anti-infective, cardiovascular, neuroscience, hormonal, and anti-ulcer drugs. The division produces a large line of adult and pediatric pharmaceuticals sold primarily by prescription or recommendation of physicians. Principal products include Depakote, Clarithromycin, Omnicef, Synthroid, TriCor, and the anti-virals Kaletra and Norvir (protease inhibitors for the treatment of HIV infection). Other products include Meridia for the treatment of obesity, Mavik and Tarka for the treatment of hypertension, and Vicodin and Vicoprofen for the treatment of pain.

Abbott's diagnostic products include diagnostic systems and tests for blood banks, hospitals, commercial laboratories, alternate care testing sites, and consumers. Principal products include reagents used to perform immunoassay tests (including Architect, AxSYM, IMx, and Abbott Quantum); Abbott PRISM; screening and diagnostic tests for hepatitis B, HTLV-I/II, hepatitis B core, and hepatitis C; tests for the detection of HIV antibodies and antigens, as well as other infectious disease detection systems; and cancer monitoring tests, including tests for prostate-specific antigens.

Other diagnostic products include the Vysis product line of genomic-based tests, including the PathVysion HER-2 DNA probe kit and the UroVysion bladder cancer recurrence kit; the LCx amplified probe system and reagents; the Abbott TestPack and Determine systems for rapid diagnostic testing; a full line of hematology systems and reagents known as the Cell-Dyn series; the MediSense product line of blood glucose monitoring meters, test strips, data management software, and accessories for diabetics, including Precision Xtra, MediSense Optium, Sof-Tact, Precision Q.I.D., MediSense II, ExacTech and ExacTech RSG, TrueMeasure strip technology, Precision Link Direct, and Precision Sure-Dose insulin syringes.

Hospital products include a full line of anesthetics, injectable drugs, infection-control products, diagnostic imaging agents, IV solutions, advanced drug-delivery systems, and other medical specialty products for hospitals, clinical labs, and alternate health care sites around the world. Specific products are hospital injectables including Carpuject and FirstChoice generics; ADD-Vantage and Nutrimix drug and nutritional delivery systems; anesthetics, including Pentotha1, Amidate, Ultane, Isoflurane, and Enflurane; Precedex for sedation; cardiovascular products, including Corlopam; Calcijex and Zemplar, injectable agents for treatment of bone disease in hemodialysis patients; and parenteral nutritionals such as Aminosyn and Liposyn.


CORPORATE CITIZENSHIP

Abbott Laboratories values and champions corporate social responsibility about as much as it does innovation and research and development. The company has established the Abbott Laboratories Fund, which contributes millions of dollars each year to health and human service organizations and sponsors programs that enhance science education, promote diversity, and provide access to healthcare for people in need. Through the fund, the company matches gifts employees make to hospitals, universities, secondary and elementary schools, and public broadcasting. The company also supports local communities through employee volunteerism and donations. Cash donations have helped support the United Way, the American Cancer Society, the American Heart Association, and other health and human service organizations.

Abbott also partners with health and human service organizations around the world, donating health care products to help alleviate human suffering. In recent years, Abbott has supported relief efforts for victims of the earthquakes in western Turkey, Taiwan, and Colombia; flooding in Venezuela; and the refugee crisis in Kosovo.

Abbott Laboratories also advocates environmental responsibility. It has developed ongoing partnerships with community organizations to provide education, opportunities for collaboration, and resources for environmental initiatives.


GLOBAL PRESENCE

Abbott's International segment produces a broad line of hospital, pharmaceutical, and adult and pediatric nutritional products marketed and primarily manufactured outside the United States. This segment also includes consumer products. While the largest part of Abbott Laboratories' sales are generated in the United States (63 percent), the company does 5 percent of its business in Japan, 4 percent in Germany, 3 percent in Italy, 3 percent in Canada, and approximately 20 percent in other countries.

Abbott has entered into joint business ventures with organizations around the world including Takeda Chemical Industries, Ltd. and Taisho Pharmaceutical Co., Ltd. (Japan), Antisoma plc (United Kingdom), Karo Bio AB (Sweden), and NeuroSearch A/S (Denmark).


EMPLOYMENT

Abbott Laboratories embraces a corporate culture that fosters workplace diversity, career encouragement, and a commitment to excellence and achievement, especially toward advancing science and the practice of healthcare. For its employees, it provides a full range of benefits in a nationally recognized package, as well as training and development opportunities across the entire company. (Money magazine has ranked the company's benefits package as one of the ten best in the United States.

MODEST BEGINNINGS

Abbott Laboratories' first product, "dosimetric granules," produced in the late 1880s by company founder Wallace Calvin Abbott, MD, was made from the active part of medicines. These granules enabled drugs to be precisely measured, which revolutionized the industry.


Fortune magazine ranked Abbott Laboratories as one of the "Top 50 Companies for Minorities" for four consecutive years, while Working Mother magazine named it one of the "Best Companies for Working Mothers."


SOURCES OF INFORMATION

Bibliography

bioscorpio. "abbott laboratories," 1 april 2002. available at http://www.bioscorpio.com/abbott_laboratories_inc.htm.

chicagotribune.com. "company profile-abbott laboratories." careerbuilder, 1 april 2001. available at http://hire.chicagotribune.com.

hoover's online. "abbott laboratories," 28 march 2002. available at http://www.hoovers.com.

nfia. "abbott laboratories." company profiles, 2002. available at http://www.nfia.com.

spaulding, b.j. "abbott laboratories: monkish no more." pharmacogenomic medicine, 31 august 1999. available at http://www.biospace.com/articles/.

yahoo! finance. "abbott laboratories." yahoo market guide, 28 march 2002. available at http://biz.yahoo.com.


For an annual report:

on the internet at: http://www.knoll-pharma.com/investor/annual_reports.html


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. abbott laboratories' primary sics are:

2099 food preparations, not elsewhere classified

2834 pharmaceutical preparations

2844 perfumes and cosmetics

3841 surgical and medical instruments

also investigate companies by their north american industry classification system codes, also known as naics codes. abbott laboratories' primary naics codes are:

311423 dried and dehydrated food manufacturing

325412 pharmaceutical preparation manufacturing

325620 toilet preparation manufacturing

339112 surgical and medical instrument manufacturing

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