News Feature | September 20, 2016

J&J Buys Abbott's Eye Unit for $4.3B - Abbott Turns Focus To Cardiovascular, Diagnostics

By Suzanne Hodsden

J&J sign

Abbott has announced the sale of its medical optics business to Johnson & Johnson (J&J) in a deal worth $4.3 billion. Abbott continues to prepare for its acquisition of St. Jude later this year, and senior executives commented that the company is focused on building leadership positions in the cardiovascular device and diagnostic spaces.

Abbott Medical Optics (AMO) carries a suite of LASIK technologies, surgical equipment for cataract procedures, and a portfolio of contact lens care products and eye drops. The FDA recently approved the company’s Tecnis Symfony intraocular lenses (IOLs), indicated for patients with astigmatism post-cataract surgery. Abbott CEO Miles D. White commented in a press release that AMO is “well-positioned” for continued success at J&J.

AMO posted revenues of $1.1 billion last year, and its acquisition will launch J&J’s entry into the cataract surgery market, according to a J&J press release.  Abbott’s line of consumer products will bolster J&J’s existing vision business, which includes Acuvue disposable contact lenses. Earlier this year, J&J launched a massive restructuring strategy that would shift the company’s focus to consumer-driven health products.

“Eye health is one of the largest, fastest growing and most underserved segments in health care today,” said Ashley McEvoy, company group chairman in J&J’s vision care companies. “With the acquisition of AMO’s strong and differentiated surgical ophthalmic portfolio, coupled with our contact lens business, we will become a more broad-based leader in vision care.”

Abbott’s divestiture of AMO adds another ball to Abbott’s M&A juggling act, aimed at building its cardiovascular and diagnostics businesses. The company reportedly is working to undo its previous commitment to buy Alere, and is completing a deal to acquire St. Jude Medical by the end of this year. Analysts from Seeking Alpha added that Abbott currently is too small to build momentum in a vision business, as well.

“We’ve been actively and strategically shaping our portfolio, which has recently focused on developing leadership positions in cardiovascular devices and expanding diagnostics,” said White in a press release.

In a recent earnings call, White noted that Abbott has built a “steady cadence” of new product approvals and launches over the first part of this year, including FreeStyle Libre — a wearable glucose sensor — MitraClip, Absorb, and Symfony.  FDA recently approved Absorb as the first fully-dissolving heart stent marketed in the U.S.

Abbott reported that the sale of AMO will not affect projected earnings per share in 2017 and, pending regulatory approvals, the deal is expected to be finalized in the beginning of next year.