Focus On Abbott Labs Remains On Pending Deals

Qualifying the second quarter results of Abbott Laboratories ABT as solid, UBS indicated the focus of investors is now on the pending deals with Alere Inc ALR and St. Jude Medical, Inc. STJ. Investors seek clarity on whether and when these deals will be consummated.

UBS Medical Supplies analyst Matt Miksic believes the Alere deal could have been done without, although opining that it would be incrementally positive. Over time, the analyst sees the St. Jude deal as presenting significant opportunity to create shareholder value. The timing, according to the analyst, is the critical element.

UBS noted the company is targeting a year-end close for the St. Jude deal. Among the catalysts that determine the success of the deal, UBS mentions 1) MRI safe label approvals, expected 2H16 for pacer leads and 1H17 for ICDs and 2) Progress on the NCD for CardioMEMS.

The firm also believes Abbott's solid showing in the Medical Devices and Diagnostics business bodes well for the second quarter Medical Devices trends. Among the other segments, which fared well on an underlying basis, was OUS businesses like established pharma. UBS noted that pediatric nutrition underperformed relative to its estimates.

Given the uncertainty surrounding the deals, UBS remains Neutral on Abbott. However, the firm is incrementally positive on Abbott's long-term prospects post the completion of the St. Jude deal. The firm believes the potential long-term benefits of the St. Jude deal may be offset by the uncertainties over the timing, execution and integration of the pending deals and adverse forex impact.

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